Investment Adviser Comments on Tax Proposal's Effect on Gifts of Intellectual Capital

Investment Adviser Comments on Tax Proposal's Effect on Gifts of Intellectual Capital

News story posted in Comments on 4 March 2009| 1 comments
audience: National Publication | last updated: 18 May 2011
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Summary

Writing to Treasury Secretary Geithner, Tudor Investment Corporation's Paul Tudor Jones argues that reducing the deductibility for top wage earners on charitable deductions is a huge policy mistake because the proposal does not recognize the enormous amount of intellectual capital from Board service and administrative involvement that is garnered for these charities.

Full Text:

February 26, 2009

Hon. Timothy F. Geithner
Secretary of the Treasury
United States Department of Treasury
1500 Pennsylvania Avenue, N.W.
Room 3330
Washington, DC 20220

Dear Secretary Geithner:

This will be short and to the point. In the crisis that we are currently in, it is impossible to know exactly whether many of the programs of the Obama and Bush administration proposed are the right way to deal with the bursting of the credit bubble. There really is no playbook. However, as someone who had chaired five different not-for-profit organizations, I can unequivocally say without any reservation that reducing the deductibility for top wage earners on charitable deductions is a huge policy mistake. It is not the reduction in giving to charities that will be the major loss from this proposal. What this proposal does not recognize is the enormous amount of intellectual capital from Board service and administrative involvement that is garnered for these charities. This valuable leadership often comes hand-in-hand with the checks. These leaders help solve problems and deliver services at a local level in the most expeditious and efficient manner. I would conservatively estimate that this intellectual capital is worth 2 or 3 times the actual value of the financial capital contributed. Quite often many of these charities are driving public/private partnerships and providing most of the thought capital in arriving at the best solutions for solving poverty or attacking environmental and conservation issues just to name a few. Anything that is done to diminish these pro bono contributions is an enormous mistake!! If anything, we should be doing just the opposite. Raise the income tax on the wealthy (which will induce them to give more), but don't reduce the charitable deduction.

As a Board chair, I have been able to bring on hundreds of incredibly bright corporate and social leaders that give their time and money to fight our nation's problems. We simply out compete the public sector in our efficiency. Charity is as fundamental of an American trait and value as Mom and apple pie, and we don't mess with that. We have to reverse engines as fast as possible on this proposal.

                Deeply and gravely concerned,

                Paul Tudor Jones II
                Tudor Investment Corporation
PTJ:jmm

P.S.: I am writing an Op Ed in the Washington Post for next week with much more detail on facts and figures. Incidentally, 98% of Robin Hood of New York City's $700 million of giving to fight poverty in the past decade has come from wage earners of $250,000 and above. And finally, a charter school I started called Excellence, which is comprised of 98% African American boys, is currently ranked 4th out of 730 New York City Public Schools. Don't take the private sector out of the game!

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Charity and Top Donors

Mr. Geithner, I was taken aback when I realized that the President put into his budget limiting the deductibility of donations to charity. The private sector has given and given substantially regardless of deductions however there are many top earners especially that would not give to charity if there were no deduction. The realization that many charities who serve the poor will fail will only increase greater dependency on government and diminish the self worth of the charities leadership and the recipients involved. I have worked as a development fundraiser for more than 12 years and know that time and money go hand and hand. If we fail to encourage giving as a policy aim we will not have charitable responses like we had to Katrina and the SE Asia Tsunami. Put simply there will never be enough love or workers that come from paid government employees to meet the social policy needs of the citizenry. Please increase the deductibility of gifts.

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