Philanthropic donation of the day, John Paulson edition

By Felix Salmon
October 23, 2012

John Paulson lives in a 28,500 square foot townhouse at 9 E 86th Street on the Upper East Side, opposite the Neue Galerie and just steps away from Central Park. He’s invested a lot into his townhouse, which hosted a big fundraiser for Mitt Romney in April. And now he’s given even more to Central Park: $100 million, to be precise. “The park is very large,” he explained to the New York Times, “and its endowment is relatively small.”

Actually, at $144 million (pre-Paulson), Central Park’s endowment, I’m pretty confident in saying, makes it the most lavishly-endowed park in the world. Half of Paulson’s gift is going to make that endowment even bigger; the other half will be spent on various capital improvements. Apparently the entrance to the southwest corner is going to get spiffed up.

The Central Park Conservancy has a CEO, of course, named Doug Blonsky; he made $493,462 in 2010. Paulson probably considers that to be a “relatively small” amount as well. Most numbers have a habit of looking small, when you’re a multibillionaire. Blonsky did his job today, hailing Paulson’s money as “transformational”.

But the fact is that if you wanted to give $100 million to charity while making the barest minimum impact on the world, you’d be hard pushed to improve on Paulson’s performance today. Maybe he was inspired by Ronald Lauder, across the street, who is just waiting for the perfect time to donate the Klimt painting he owns to the museum he founded, where it has been hung since he bought it.

On the other hand, if you wanted to make a charitable donation expertly calibrated for its helpfulness with respect to your social-climbing ambitions on the Upper East Side, then a splashy gift to the Central Park Conservancy could hardly be improved upon. The gift was announced with great fanfare: a massive press conference and photo opportunity, dozens of park employees, the Mayor, the whole bit.

Of course, since this is a charitable deduction, it’s a tax expenditure, too. I don’t know what Paulson’s marginal tax rate is, but in any case, if you multiply that by $100 million, you get the amount of money that taxpayers are being forced to contribute to John Paulson’s 843-acre back yard, in the form of foregone tax revenues. Is that the best use of public funds? Almost certainly not, but we don’t have any choice.

I spent last night learning a lot about the Drugs for Neglected Diseases initiative — an incredibly exciting model of drug development and clinical testing which refuses to deal in any kind of patents and which has already, in its short life, come up with six transformational treatments for diseases which are too rare, or suffered by people too poor, for the market to ever really help on its own. It’s not a particularly sexy charity, and doesn’t have a Halloween ball full of boldface names, but it saves lives, and as a byproduct it’s also helping to open up drug libraries which have been neglected for decades. What’s more, it acts on a tiny budget, mainly acting as a liaison between many other actors, helping them to work in concert with each other.

After seeing the amazing things that are being done by DNDi, it was a little depressing to wake up to Paulson’s preening performance. He is of course free to spend his money any way he sees fit. He has more money than he could ever spend, so the next thing on his list is acquiring the respect and admiration of his social circle. And he’s going about that in a very effective way. I just don’t see why the coverage should be so glowing, and I certainly don’t see why U.S. taxpayers should be chipping in.

This gift, in other words, is Exhibit A in any attempt to cap the amount that American taxpayers can deduct in any given year. Foster Friess likes to say that the rich shouldn’t pay any taxes at all, and that instead they should “self-tax” by giving their money to carefully chosen charities. What today’s news underlines is that while such donations are ostensibly in the service of helping others, in practice they tend to be extremely self-serving. The rich can give away more money than the rest of us. But that doesn’t make them any better at it. Quite the contrary.

Comments
15 comments so far

Wow, nice to see someone stand up to the rich for once. I just don’t get how people in this country don’t understand how sick and evil these people are. 100 million could have saved the lives of a lot of people who need food, shelter or medicine. How do these people sleep at night knowing that their silly ‘I have more than you do’ power games are costing innocent children their lives? How do you buy your 7th house or 10th maserti when there are people literally unable to stand up from malnutrition or disease. Maybe we can’t fix any problem in the world, but how do you not keep trying until you are down to, say, your last 50 million?? Sick, sick people….

Posted by DougW659 | Report as abusive

“multiply that by $100 million, you get the amount of money that taxpayers are being forced to contribute to John Paulson’s 843-acre back yard, in the form of foregone tax revenues.”

…yuck!

For starters it’s not “our money” until it hits the treasury’s account. We (through our elected representatives) decide how to spend our money. JP get’s to decide how to spend his money. The “you didn’t give that” argument is pretty weak in my view.

Unlike some of his even wealthier billionaire brethren, JP actually IS a poster child for conspicuous consumption. I bet he has spent an average of 2-5 Million per year on his lavish lifestyle. (In that figure we can’t count spending on real estate just the implied annual rental value… you can consume a steak dinner after all… but you can only consume a luxury penthouse for the time you live in it.)

Still though… while the 50 – 100 million Paulsen might be able to spend on himself during his life might seem obscene to many… it’s still not even 1/100th of his current wealth estimated to be around 10 billion.

Lots of smart people are upset to see people make massive sums but really what offends them is that they don’t get to dictate how those resources are invested in life and disposed of upon the death of the billionaires.

Ask yourself Felix… are we really bettor allocators of capital then they for the 90 – 99% of the wealth they will NEVER spend.

Posted by y2kurtus | Report as abusive

Wow, Felix. Didn’t know you were so sanctimonious.

Posted by Pointfinder | Report as abusive

Of course, the charity in the US that usually receives the most in donations annually is:

The Harvard Endowment.

Because obviously if you want to find the most needy Americans, those terribly under-privileged Harvard students are it.

Posted by sean_from_NZ | Report as abusive

So, your beef is with the fact that he gets a tax deduction? Get serious.

Posted by surambaya | Report as abusive

No mention of Paulson’s very favorable ‘carried interest’ tax treatment which his donation to/investment in the Romney campaign is clearly designed to preserve??

That is the better story here.

Posted by Ed62 | Report as abusive

@ y2kurtus: “are we really bettor allocators of capital then they for the 90 – 99% of the wealth they will NEVER spend.”

Since a central plank of the modern Republican party is that fiscal deficits and the U.S. Government debt will ruin this country, and Paulson is vocally supporting Romney, then tax deductions for contributions that do not appear to be desperately needed is, according to his/their own policy, a terrible allocation of funds by Paulson. Has he not been listening to enough Pete Peterson? Why does Paulson hate America?

Posted by SteveHamlin | Report as abusive

As a native New Yorker I am pretty happy about Paulson’s gift. Central Park is a huge, public place used by a wide variety of people for a wide variety of activities. There is no admission fee.
How many charity runs and walks take place in the park every year? A ton, as well as people exercising, reading, socializing, children playing, etc.
Paulson has donated to his local community in a way that benefits all.

Posted by NativeNYer | Report as abusive

The only people grosser than the John Paulsons of the world are the parasitic politicians that enable them.

Posted by Woltmann | Report as abusive

Wow, Felix. Didn’t know you could be so sanctimonious.

Posted by Pointfinder | Report as abusive

a) Had Mr.Paulson been a citizen of Scandinavian countries, he would never have been able to earn billions of dollars. Such a large customer base like America doesn’t exist there.

b) Even if he somehow earned billions of dollars there, he would have to pay high taxes on that income. My rough estimate is his wealth would be 1/10th of his current wealth. It takes money to earn lots of it.

c) So during the period that Mr.Paulson made all his wealth in the largest customer base in the world (only by financial gambling that is), average American was struggling to make his ends meet.

d) This day would never have come had it not been anti tax lobbyists take over Washington with their GOP friends.

Posted by littleG | Report as abusive

Timestamp.

Posted by littleG | Report as abusive

I thought the concept of philanthropy was grounded in the broader concept of disinterested altruism. I see none of that with that Mr Paulson who’s essentially donating that money to himself and his own back yard.

The most charitable view one may conjure about that kind of “philanthropy” would be to call it “tax-exempt gardening and yard improvement”.

I wish I could that for the surroundings of my own little shack out there in the boondocks. But for some reasons, one of them having to do with not being a well-connected billionaire, I don’t think the IRS would take a very kind view of the whole deal…

Posted by Frwip | Report as abusive

y2kurtu, you’re obviously unacquainted with the concept of a tax expenditure.

You’re kinda right that “it’s not “our money” until it hits the treasury’s account”, but the thing you’re perhaps willfully missing is that if it weren’t for the tax deduction(s) embedded in the tax code, that money would have gone into the treasury. For that reason, the revenue losses to the U.S. Treasury is the same thing, from a budgetary point of view, as a taxpayer subsidy.

Felix is entirely correct on this one.

Posted by Strych09 | Report as abusive

@Strych09

What is Felix correct about?

That JP wants to build up some good will in the community? I’ll grant you that I guess.

That we the little people were entitled to the treasury’s share of his $100,000,000 gift and so really we not he donated 35,000,000 of that amount and he donated only 65,000,000? If that helps you sleep nights sure… believe that.

Unlike Steve Jobs or Thomas Edison, JP didn’t invent something that will benefit a generation of people around the world. What he did do was to spot the largest imbalance of risk that has ever existed and show it to the world with his investors money.

If you have any question as to if that was the “right thing” or a “good thing” look at Japan 1990 – 2012. Valuations got so far out of line that their market fell 75% over a 22 year period and has yet to recover. I’ll repeat for effect. 75% market drop no recovery 22 years from peak. When you envy JP, his money, and his gifting tell yourself that he helped you avoid that fate.

Remember also that Felix sort of belittled Mr.Facebooks mega-donation to Newark Public schools. It seems the rich can do little to appease the masses anymore. Dangerous times!

Posted by y2kurtus | Report as abusive
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