In May of this year, as the Biden administration proposed big tax hikes publicly, it secretly promised its allies that the tax increases would cause large amounts of additional money to flow into “charities.”
“Mr. Biden’s proposals would encourage the wealthy to find new workarounds to reduce the amount of tax they or their heirs pay,” reported the New York Times. “Mr. Biden could have limited that workaround by proposing a cap on itemized deductions for high earners, as he did in the campaign, but such a plan was not included in his $4 trillion economic agenda introduced this spring.”
This makes little sense if you assume Biden’s tax policy is simply a way to raise revenue. But ask yourself who stands to benefit from this massive cash infusion, and it all becomes a little clearer. Among the biggest beneficiaries of left-wing donor money will be progressive advocacy organizations.
Last month, Arizona graduate student Sarra Tekola recorded a viral video of herself harassing two younger students. Their sin? Sitting while white and having a pro-police laptop sticker in Arizona State University’s “multicultural center.” Tekola, it turned out, was not merely an impassioned student, but a fellow of the Ford Foundation, a longtime backer of progressive causes. This was not a casual disagreement among students, but a political attack made possible by one the most powerful institutions in America.
This is hardly uncommon for the Ford Foundation. The group’s fellowship email directory is used to harass anyone—inside or outside of the organization—who dares question leftist orthodoxy. In late September, its fellows helped persuade MIT to disinvite a prominent scientist from giving a prestigious lecture.
While theoretically dedicated to charity, the president of the Ford Foundation, Darren Walker, has been on the board of some of America’s largest and wealthiest corporations, and collects well over $1 million a year in various forms of compensation. Meanwhile, the foundation he runs possesses $16 billion of assets. Left-wing activism pays very well, it turns out, so long as it’s packaged as charity.
The Ford Foundation is hardly alone. It is merely one fish in an ocean of endowments and foundations dedicated to left-wing causes. Others include the Gates Foundation, the Macarthur Foundation and the Harvard university endowment. Taken together, they represent well over $1 trillion in wealth, and that wealth is deployed in almost exclusively partisan ways.
These organizations do more than directly finance left-wing social justice advocacy. They’re one of the primary reasons so many of our business and financial institutions have joined the Left in the culture wars. In my business, for instance (I run a venture capital fund), among the largest sources of investment capital are these very foundations and endowments. Friends of mine have had to fill out long “diversity” questionnaires to ensure their business is properly committed to the tenets of critical race theory, or else risk losing business. Recently, Harvard’s endowment began tying its money to various environmental benchmarks, making it hard for companies to get investment capital unless they wave the flag of climate activism. Gone is the Left of old, dedicated to fighting “the man” in the name of the working class. The new Left has decided it’s easier to do business with him.
This is a troubling trend by itself, but the dirty little secret of this brand of well-endowed leftism is that it depends on a host of special favors from the government. Thanks to its endowment, Harvard operates as a hedge fund with a university on top. But the difference between Harvard’s endowment and any other hedge fund is that normal hedge funds pay substantial taxes and Harvard pays nothing. That’s right: when you call your hedge fund a charity, you get to pay your employees exorbitant salaries, accumulate billions in financial gains and then avoid any tax.
This helps explain why foundations operate as tax shelters for the ultra wealthy, and why the Biden administration sees its tax policy as an opportunity to further enrich its allies.
It is against this backdrop that I proposed we tax the assets of these foundations, and shrink their size over time. Most fundamentally, it’s the fair thing to do. It’s preposterous that my middle-class aunt pays a higher tax rate than the $41 billion Harvard endowment. But the power of these institutions also creates a massive left-wing bias at the heart of our society. The Left has stashed a trillion-dollar war chest and protected it from ever paying a nickel in tax. There is no comparable right-wing institution, no similar preference created for conservatives.
Of course, my argument was met with howls of protest from the conservative establishment. MSNBC contributor Noah Rothman, responding to my proposal, stated, “Tax exemptions for institutions that devote themselves to advocacy and endure the federal scrutiny associated with their organizational status, to say nothing of the deductions available to contributors to those institutions, is a vital aspect of the social contract.” Importantly, this isn’t even an argument. Why is it vital to give special privileges to the Ford Foundation? Why should Harvard pay nothing while a married couple with three kids pays a lot?
Others said my argument was “not conservative” at all, because it may lead the Left to come after the nonprofit status of American churches. But the Left has come after churches for decades, while many so-called Republicans sat on their hands. In my home state of Ohio, a number of churches are regularly harassed by left-wing activists who report their activity to the IRS. Some conservatives have so internalized the Left’s arguments that they ignore the harassment of churches in their own communities while playing defense for multi-billion-dollar left-wing social justice organizations.
Churches are simply different from secular “nonprofits.” First, churches played a major role in our Founding. The First Amendment guarantees religious freedom, and our Founding Fathers recognized that religion was a core part of the civic virtue necessary to sustain the Republic. Second, under current IRS regulations, an entity can lose its nonprofit status if it “directly or indirectly” functions as an arm of a political party. Even the most politically active churches I know are far less in bed with a party than the Ford Foundation and similar organizations.
Yet even if you set aside churches, many conservatives may fairly wonder what the limiting principle is. Here’s a simple proposal: any charitable organization with an endowment over $100 million must spend 20 percent of its endowment each year, or else it loses its 501c3 status and the preferential treatment of its income. This would allow colleges and other secular nonprofits to maintain an endowment without accumulating a war chest of money. And it would encourage “charities” to spend a little more time on their core mission and a little less time manipulating and influencing capital markets. Last year, the Ford Foundation earned $3.6 billion in income on its $16 billion endowment, yet it only spent $1 billion on program activities. No one can claim with a straight face that this is a charity, and the rules we make for charities should reflect this reality.
Our laws should promote organizations that serve our society, and reduce the power of those that harm it. The Ford Foundation and the Harvard endowment don’t have a constitutional right to tax advantages that are unavailable to the vast majority of American citizens. They have amassed a fortune that is used as a weapon against conservatives (and even moderates) in the media, the academy and in business.
The time for complaining has passed. The time for action is now. These organizations have declared war on America; now, we fight back.
J.D. Vance is the bestselling author of Hillbilly Elegy: A Memoir of a Family and Culture in Crisis. Follow him on Twitter: @JDVance1.
The views expressed in this article are the writer’s own.
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