Merry Christmas! Maybe it's because of some vestigial religious undertones to this holiday, or maybe it's because the end of the tax year is rapidly approaching, along with the urgency of maximizing your annual deductions. Either way, this is a particularly philanthropic time of year. And since I'm personally feeling very charitable right now, I've decided to do you all the favor of telling you that when it comes to philanthropy, you're doing it wrong.
Interestingly, philanthropy is one of those areas where the richer you are, the more likely you are to be doing it spectacularly wrong. So to make you feel better still, this is aimed mainly at the mega-philanthropists: the people who give away millions of dollars and feel fantastic for doing so. These are the people at the heart of the debate over capping the mortgage-interest tax deduction: they receive an outsized proportion of its costs, on the grounds, to quote Bob Shiller, that
charitable giving can substitute for a good part of the things that the government would otherwise be doing itself, a factor that is rarely introduced into budget calculations. Indeed, in many cases, individual philanthropy may be more effective than government expenditures.
Being "more effective than government expenditures" is a pretty low bar to hurdle. But that doesn't mean it's reasonable to assume that most philanthropic donations hurdle it with ease. Remember John Paulson, with his $100 million gift to the Central Park Conservancy: I think I'm entirely safe in saying that the government, in the form of the New York City Department of Parks & Recreation, spends its money a lot more carefully and effectively, despite the fact that it has to divvy up its budget across 5,000 different properties, including Central Park.
And the much bigger problem is that Paulson is no exception here. Let's run down the list of things you're likely to be doing wrong, if you're a rich philanthropist: