How generous is Mitt Romney?
Mitt Romney’s campaign likes to trumpet its candidate’s generosity. The summary of Friday afternoon’s docu-dump of Mitt and Ann Romney’s 2011 tax returns hailed the couple’s “generous charitable donations”. They made $13.7 million and donated $4 million, which is impressively described as “amounting nearly 30% of their income”.
John Podhoretz, looking through the misleading income-to-donations lens, thinks Romney is an “extraordinarily, remarkably, astonishingly generous man”. Conor Friedersdorf is less hyperbolic, but still throws out praise: Romney “seems to be a very generous guy…good on [him] for giving lots of money to charity”.
Giving away almost a third of your annual income sounds laudable, but for someone of Mitt Romney’s wealth, charity should be assessed by net worth, not income. The Romneys’ net worth is currently estimated at $250 million. $4 million is just 1.6% of that net worth.
It’s an odd kind of generous for a man to be worth a quarter of a billion dollars, earn $13.7 million on that $250 million (a 5.5% return), and then donate 30% of that $13.7 million. No wonder he conflates paying taxes with giving to charity. Generosity is generally tied to the concept of relinquishing wealth — and that is not what Romney is doing. If Romney’s massive base of wealth continues to appreciate at its mediocre 2011 rate of return, and if he continues to give at the same rate as he did this year, then in a decade, he’ll have a net worth of $373 million and will have made $53 million in donations. $53 million is real money, but the trend here is all wrong. As Romney ages, his net worth should go down, not up.
If they really wanted to make an impact on causes they care about with the massive wealth they’ve accumulated, the best thing for the Romneys to do is give away as much as possible, as soon possible. Charitable contributions are most effective when they are front-loaded. Romney, at 65 years old, won’t end up with lower net worth than he has now unless he gives much, much more aggressively. Right now, he’s on track to just keep on accumulating.
Once you reach the Romneys’ level of rich, you have to give with determination to counteract the structural momentum of your wealth. As Ezra Klein said, “that’s the nice thing about being rich: It makes you richer”. On its current trajectory, the Romneys’ wealth will just go on gathering. They have and will continue to make donations, but but not at a level that even comes close to reducing their net worth. In contrast to the 11 additional billionaires who have taken the Gates/Buffet pledge to give away half of their wealth in their lifetimes, the Romneys aren’t chipping into their net wealth — and don’t seem to have a plan to. Instead, they’re content to make relatively small annual gifts. In fact, back in January, Romney thought he had actually given an an even lower lower portion (19%) of his income to charity than is now being reported, thanks to an inaccurately high estimate of his income.
There is, however, one cause Romney has devoted a large portion of his net worth to: his political campaigns. He spent $44.6 million of his own money losing to John McCain in the 2008 Republican presidential primary. When he ran for governor of Massachusetts, he self-financed $6 million of the $9.4 million the campaign spent in total. If Romney gave to charities annually like he gave to his first presidential campaign, he’d give away half his current net worth in just four years. And if he made that commitment, I’m sure Bill Gates and Warren Buffet would happily share a stage with him to laud his generosity.