Ultra-wealthy Americans want you to think their philanthropy will change the world. They should just pay their taxes instead.

insider@insider.com (Paul Constant) 

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Author Anand Giridharadas says charitable giving is a 'smokescreen' for the ultra-wealthy. 

Paul Constant is a writer at Civic Ventures and cohost of the "Pitchfork Economics" podcast.

In a recent episode, author Anand Giridharadas explained how wealthy Americans use philanthropy to avoid taxation.

He says it's a relatively cheap way the ultra-wealthy can "do bad things in the billions and wipe it out with gifts in the millions."

In this week's episode of "Pitchfork Economics," journalist Anand Giridharadas, author of the excellent book "Winners Take All: The Elite Charade of Changing the World," explains how billionaires use philanthropic giving to whitewash their reputations - and avoid taxation.

"We're living in this time in which you cannot walk down the street in certain ZIP codes of this country without bumping into a plutocrat trying to change the world," Giridharadas said. It seems as though every billionaire in America has at least one nonprofit foundation focusing on one social ill or another.

But aren't these splashy hundred-million-dollar-plus donations a good thing? Aren't these billionaires creating positive change with their charitable donations? Giridharadas argues that the charitable giving is a smokescreen to disguise the fact that the richest humans in the history of world "benefit from a near-monopoly on the fruits of the future" in which they have "essentially rigged the society to function as a casino in which the house - i.e., them - always wins."

"You've got a whole class of people who have cause to be resented," Giridharadas said, "who are, in many cases, manipulating their company books so they don't pay taxes, who are underpaying workers." For those wealthy few, he said, philanthropy is "a relatively cheap, bargain-basement way of changing your name. You can do bad things in the billions and wipe it out with gifts in the millions."

Despite their splashy press releases touting huge donations, the fact is that the super-rich's charitable giving is a drop in the bucket compared to their ever-growing fortunes. Zara Khan points out for Datawrapper, "charitable donations by the richest 20 Americans account for less than 1% of the total wealth of the donors."

If you are an average American taxpayer, the 400 wealthiest families in America now pay a lower tax rate than you. Imagine all the programs and projects we could have built had the tax rate for the wealthiest Americans stayed at 91%, where it was in the US from 1951 to 1964 (PDF), when the economy was growing at its fastest.

That's why "Pitchfork Economics" host Nick Hanauer this week wrote an editorial for the New Republic calling on Congress to raise taxes on the wealthiest Americans - including Hanauer.

"It drives me crazy when I hear Democrats say that 'for the sake of the economy' we have to cut back on the $3.5 trillion spending in Biden's Build Back Better legislation, or that we can't possibly raise taxes on the wealthy and huge corporations as much as Biden proposed," Hanauer wrote.

"Those folks have it totally backward," Hanauer continued. "Taxing the rich is the only plan that would increase investment, boost productivity, grow the economy, and create more and better jobs." He's right - raising taxes on wealthy Americans and corporations would pay for the $3.5 trillion in spending over the 10 years of the Build Back Better plan, and the mammoth scope of that legislation, from greening the economy to investing in childcare to increasing educational opportunities for children and adults, would more significantly transform the economy than any plutocratic philanthropy ever could.

That's because there's another benefit to raising taxes on the super-rich: Their money would no longer be hoarded in the kind of offshore accounts that we learned about last week in the bombshell Pandora Papers. Instead, once it was invested in ordinary Americans, that money would circulate through local economies from hand to hand, creating jobs, spurring small business growth, and strengthening local communities through increased consumer demand. It's a much simpler system than elaborately disguising ostentatious wealth through philanthropic giving - and it has the added benefit of being better for everyone in the long haul.