The Last Shall Be First
posted by Frank Pasquale
The WSJ has a terrific article on “stretch” givers–people who make “donations seemingly out of proportion to the givers’ resources . . . . [which] require donors to make sacrifices or at least live more modestly than their income would allow.” Recent legal changes have helped this “movement,” as “[t]he Pension Protection Act of 2006 allows people 70½ years of age and older to make tax-free donations of up to $100,000 directly from Individual Retirement Accounts.” What’s particularly surprising about the article is that the big givers often end up doing better than stingier peers:
Arthur C. Brooks argues in his book “Who Really Cares,” which identifies the forces behind American charity, that people who give in a way that pinches are happier and, surprisingly, end up wealthier. According to Mr. Brooks’s analysis, a dollar donated to charity led to $3.75 in extra income for the donor in 2000. “They often create great discomfort among their families, but when people give there is substantial personal transformation,” says Mr. Brooks, an economist and professor of public administration at Syracuse University’s Maxwell School. “They tend to work harder,” leading to greater prosperity, and in the long run, he says, “this leads to more success, both financial and nonfinancial.”
I had worried that the “super givers” would Darwinianly be out-competed by greedier peers intent on keeping every penny “in the family.” But as one interviewee says in the article, she doesn’t “believe in inherited wealth” in part because she’s “seen it ruin so many nice families.” If that logic takes hold, perhaps we can expect to see “more aging Baby Boomers are choosing charity to add meaning to their lives — and to get a buzz that lasts longer than the kick that comes from splurging on a designer watch or expensive car.” Such a movement could well be self-reinforcing, as often the only reason people (believe they) need such luxuries is because of the competitive spending of peers. Perhaps diamond taxes can help keep the giving going.
Photo Credit: Flickr/Scottwills.
July 7, 2007 at 3:45 pm
Posted in: Behavioral Law and Economics, Culture, Economic Analysis of Law, Tax
Print This Post
Responses (1)
Heidi Kitrosser - July 7, 2007 at 4:16 pm
Great post, Frank! The point about inherited wealth reminded me of a couple of things. First, I recall reading an article that quoted Warren Buffet as saying that he wants to leave his kids and grandkids enough money so that they can do anything, but not so much money that they can do nothing. A refreshing philosophy! Also, I recall a story about how the current Hilton clan came to inherit their wealth from Conrad Hilton (great grandfather to Paris). Here’s a little bit on that from a story by Kay Hymowitz in City Journal:
“[Conrad] was an industrious, self-made millionaire, who, having struggled to make his own fortune, didn’t much care for the idea of turning his offspring into trust-fund kids. He was also a devoted, though obviously flawed, Catholic. Accordingly, and to the dismay of his potential heirs, he left the vast bulk of his fortune to the Catholic Sisters. It was only through the energetic legal maneuvering of his son Barron that the Hilton progeny got their mitts on Conrad’s money.
What would Hilton Sr. make of the vulgarity of present-day Hiltons?”
Leave a Reply