Making philanthropy cool.

Who's giving, who's getting.
Feb. 16 2007 7:29 AM

Our Better Half

How to make giving it all away part of the American success story.

Click here to see all of our Slate 60 coverage.

Illustration by Mark Alan Stamaty. Click image to expand.

After two-plus centuries of nationhood, it's time to update the American Dream. Not because Americans can no longer go from rags to riches. Rather because, after two centuries of the great American experiment, it's safe to conclude that our particular blend of free enterprise and government alone leaves too many important problems unsolved. From education to health care to energy to wealth disparity to the environment, we're living proof that being a rich nation doesn't necessarily make us a great one.

How can we become the latter? By developing a not-for-profit sector as creative, competitive, and well-funded as our corporate sector. Private for-profit enterprises and public government agencies each have their place—the Department of Health and Human Services would do a lousy job running Wal-Mart, and the Air Force, for obvious reasons, shouldn't report to Boeing. But each is also constrained by its own organizational principles: Government agencies need to maintain a political consensus, and corporations need to make a profit.

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Between these two forms of organization, however, is a third that has the freedom to operate without the need for consensus or profit. The nonprofit sector could solve a lot more of our problems—if we make it bigger, more effective, and more central to our economy.

How can we do this? First, we can adopt more of the organizational and financing practices of the corporate world. In the past decade, for example, "venture philanthropy" has begun to build the equivalent of a Silicon Valley-style venture culture for "social entrepreneurs." That's a good development. But we also should vastly increase our collective investment in the sector by making over the American Dream. For future generations, getting rich must only be the first goal. To complete the dream, any self-respecting American capitalist must feel compelled to follow in the footsteps of the Slate 60 and give all (or a lot of it) away.

Before we discuss some ways of making this happen, let's look at the big picture. According to the Urban Institute, Americans devote about 2 percent of their after-tax income each year to charitable donations. According to another nonprofit, Giving USA, these individual contributions totaled $199 billion in 2005. This is an impressive number, but it amounts to less than a quarter of the $927 billion in individual income taxes collected that year by the federal government alone. It also amounts to less than one-sixth of the collective net worth of the 400 richest Americans ($1.25 trillion). So, it does not seem a stretch to suggest that compared to the government and the corporate sectors, the nonprofit sector is, well, underfunded.

Thanks to a century's worth of quiet philanthropy, combined with some heroic efforts in the past decade, this may be about to change. For decades, the foundations established by Carnegie, Rockefeller, Mellon, et al., have quietly and tastefully distributed billions. In recent years, however, high-profile megagifts by Ted Turner, Bill and Melinda Gates, Warren Buffett, and others have begun making those who simply buy toys and hoard their piles look selfish, shallow, and un-American in comparison.

How can we do more to make such folks into heroes—and inspire the entire nation to follow in their footsteps? Lists like the Slate 60 and BusinessWeek 100 are a good start. Here are some more suggestions:

  • Find image magicians like those who created Valentine's Day, Mother's Day, Diamonds Are Forever, Just Do It, the Marlboro Man, Santa Claus, and other marketing concepts that have become integral to our culture. Tell them to make philanthropy—and our great philanthropists—part of our national DNA.

  • Banish the words charity and gift from the nonprofit lexicon. The new American Dream can't be about passive, condescending check-writing. It must be about leadership, inspiration, and problem-solving.
  • Change the tax code to further encourage philanthropy, especially among the rich. For example, increase the income-tax rate on incomes above, say, $200,000 a year, while also increasing the tax-reducing power of charitable donations. Currently, charitable donors can only deduct 50 percent of their adjusted gross income in any given year (and in some cases, only 30 percent). This discourages the 2.5 million Americans who make more than $200,000 to give the bulk of it away, let alone the 10,000 who make $10 million or more.
  • Re-brand the "estate tax" as the "un-American activities tax," the "Scrooge tax," or the "keeping America great by motivating your lazy-ass kids tax."
  • Expand the Slate 60 to the Slate 400. Go back to the image magicians and make inclusion on this list more prestigious and impressive than inclusion on the Forbes 400. Competition inspired the Slate 60 to begin with; up the competitive ante.

  • Supplement the public-adulation carrot with the peer-pressure stick. Cross reference the Slate 400 with the Forbes 400 to create a new list: America's 100 Stingiest (those who are worth more than $1 billion who contribute the smallest percentage of their net worth each year). Update this list in real time, online, and post it everywhere that the billionaires' friends, colleagues, and neighbors will see it every day. Include pictures, of course.

When will we know we've arrived? When we hear about the latest rags-to-riches high-tech or hedge-fund billionaire and think, "Wow, he or she is halfway to achieving the American Dream."

Henry Blodget is the founder, editor, and CEO of Business Insider. Follow him on Twitter.

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