Current Events and Philanthropy / From the Editors

Carnegie Libraries, Holiday Re-gifting, and the Perils of Tax Windfall Philanthropy

Editors’ Note: A version of this essay, by HistPhil co-editor Benjamin Soskis, was published online in the Chronicle of Philanthropy.

Not long after Congress passed its massive tax overhaul—and even before President Trump had actually signed the bill itself—corporate PR departments across the country were busy putting out press releases documenting how the bill’s passage had precipitated a wave of corporate largesse.

Corporations were the tax cuts’ chief beneficiaries: the bill cut the corporate rate from 35 percent to 21 percent—at a cost to the U.S. Treasury of approximately $1 trillion. The prospect of more money in their coffers led some corporations, such as Fifth Third Bancorp and Wells Fargo, to announce they were increasing their minimum hourly wage (though it should be noted that many of these moves were in the works for a while, and were merely announced at a politically opportune moment). Many other corporations, such as Comcast, Pinnacle Bank, and AT&T, took the tax bill’s passage as an opportunity to offer up one-time bonuses for workers.

A few others made announcements that the cuts had inspired additional commitments to corporate philanthropy. Boeing, for instance, announced $100 million in corporate giving, on top of $200 million committed to work-force development and facilities and infrastructure improvements. “Each of these investments benefits Boeing’s most important strength—our employees—and reflects the real-time impact and economic benefit of the reforms,” declared the company’s CEO. For its part, Wells Fargo announced that it would increase its corporate giving to $400 million in 2018, up from $281 million just a year ago.

This all made for some compelling political theater and if the intended audience was the White House, the performance received stellar reviews. President Trump trumpeted the news of the bonuses at a celebratory press conference soon after the bill passed and crowed on Twitter that the tax bill “has taken on an unexpected new source of ‘love’—that is big companies and corporations showering their workers with bonuses. This is a phenomenon that nobody even thought of, and now it is the rage. Merry Christmas!”

As Scott Reed, chief political strategist for the U.S. Chamber of Commerce, explained to the Washington Post, announcing bonuses and philanthropic programs tied to the tax bill is “an extremely clever way to get the president’s attention. It reinforces his signature legislative success, and it probably gets them some good points inside the White House.” Those points might come in handy, given the fact that the fates of many of the corporations that made the announcements were tied to regulatory or contracting decisions that the Trump administration would make in the future.

There were broader messages delivered by these announcements as well. (To say nothing of the personal inclinations of individuals, who, upon finding themselves to be the beneficiaries of “tax winnings,” might decide to #GiveItBack, in the social media prompting of one New York Times reporter). Throughout the deliberations on the tax bill, nonprofit officials warned that its provisions would reduce incentives for charitable giving and lead to declines in contributions; Patrick Rooney, an economist at Indiana University’s Lilly Family School of Philanthropy recently estimated that American individuals and companies will give $21 billion less per year.

Yet here was evidence of a contrary phenomenon: the tax bill prompting a boost in giving. And it could be interpreted as an augur of what has been the GOP’s primary counter to charges that their bill endangered charitable giving: that the economic confidence and growth sparked by the bill would in fact lead to increased charity. As Bob Parsons, founder of GoDaddy and now the head of YAM Worldwide, declared in announcing a series of bonuses that he would extend to his employees, “The passage of the tax credit is a catalyst for explosive economic growth. On a massive scale, the lowered federal tax burden on businesses will increase investment, entrepreneurship and corporate philanthropy. I’ve always believed in sharing good news and have decided to celebrate the tax plan by giving back to my staff.”

Parsons could have waited for the explosive economic growth to actually kick in (many economists assume the bill’s economic boosting effects will be modest). But proximity to the primal political act was key to the philanthropic performance. It secured the legitimating lines of causality: the GOP’s tax bill produced the gift.

But this proximity also comes with some serious risks. In order to appreciate them, you need to understand one particular relationship—an especially dominant one—that has developed between philanthropy and the free-enterprise system. In it, the philanthropic gesture provides an exceptional opportunity to secure ownership claims to whatever is being donated. Giving something away becomes a means of asserting that one had the right to do so in the first place.

And yet, whereas in other forms of political discourse, such ownership rights are often staked to the methods and moments of wealth accumulation—I dug the well; I built the factory; I wrote the code—much celebrated philanthropy has encouraged a dissociation between the sources of wealth creation and the decision to redistribute parts of it. This was especially the case for earlier generations of modern philanthropists, most of whom turned their attentions fully to giving only late in their lives, once they had retired from business.

The individualistic ideal of stewardship flowed into the space left between accumulation and redistribution. It provided a useful answer to questions regarding the sources of wealth accumulation and how these related to philanthropic responsibility. In the religious version of the ideal, divisions of wealth were divinely sanctioned; in a secular version, they were the product of Darwinian selection. In both cases, they carried with them the obligations to honor and secure those claims to individual ownership by giving a part of one’s wealth to serve the public good.

This was a powerful conceptual arrangement and versions of it have survived to the current day. But it does have its vulnerabilities. And those are most apparent when the true sources of wealth accumulation, often rooted in the rougher precincts of political economy, push up closely into the preserves of philanthropy.

The classic example of the stewardship model coming under strain from the troubled provenance of wealth accumulation might be Andrew Carnegie’s donation of libraries to benefit the communities of Braddock and Homestead, Pennsylvania, where his major steel plants were located. Carnegie made a point of giving the libraries—the first of the more than a 1,600 he donated domestically to towns across the nation—only after he had broken the unions there (with the help of private Pinkerton troops and the intervention of Pennsylvania’s state militia). He was thereby able to slash wages and to compel workers to accept 12-hour days; in doing so, he secured increased profits which he could then redirect toward philanthropic ends. Carnegie called the libraries a monument to this new “partnership” between himself and his supposedly repentant workers.[1]

At the dedication ceremony of the Braddock library in 1889, Carnegie rehearsed some of the material that would make it into his famous “Gospel of Wealth” essay later that year. One prominent criticism of that tract was, in the words of an Irish MP, that it suggested that “the public ought not to ask how [the millionaire] has acquired his wealth, but [only] how he administers it.” But in Braddock and in Homestead, with the gift coming so close after brutal acts that would bolster Carnegie wealth—with the gift, in a sense, consecrating those acts—it was impossible for many not to ask those questions.

Unsurprisingly, few Carnegie Steel workers actually patronized the institutions (it didn’t help that working 12-hour days left little time for leisurely reading). More than a decade later, representatives from the Western Federation of Miners suggested putting up a picture of “Pinkerton thugs” shooting down striking workers in every one of the libraries that Carnegie donated, to make the connection between wealth accumulation and redistribution vividly manifest.

Much like Carnegie’s dedication of steel-town libraries, this season’s announcements of bonuses and corporate giving programs following the tax bill windfall is the sort of philanthropic gesture that makes vivid the connections between the generation of corporate wealth and its redistribution. Today, however, it might make sense to have pictures of well-heeled K Street lobbyists instead of Pinkerton thugs for visual representation. That’s because, as scholars such as Larry Bartels have demonstrated, the wealthy’s influence over government policy has played an enormous role in the amplification of inequality on which contemporary philanthropy depends.

Philanthropic performances like the ones recently put on by beneficent corporate CEOs in the wake of the tax bill pull back the curtain and make this clear. Behind closed doors, the president offered a similar message. “You all just got a lot richer,” Trump reportedly told a number of friends who were dining at his Mar-a-Lago resort the night after he signed the bill into law. Sure, some of those riches might make their way into philanthropy. But those assembled at Mar-a-Lago knew who the real winners from the tax overhaul were.

Economists have estimated that workers (including managers and top executives) will ultimately see about a quarter of the benefits from the corporate rate cuts—the rest will go to shareholders; in fact, a little more than a week before it announced its $100 million philanthropic commitment, Boeing unveiled an $18 billion share buyback plan that would boost stock prices. And in the U.S., where 80% of the value of stocks are held by the richest ten percent, those increases will largely benefit a small, elite class.

Referring to Wells Fargo’s announcement that it would commit an additional $400 million to corporate philanthropy, New York Times Washington correspondent Binyamin Appelbaum noted on Twitter that Goldman Sachs had estimated that the corporate tax cut the bill enacted would increase the company’s profits by $3.7 billion next year. “So they’re basically tithing.”

In a religious context, tithing is a way of acknowledging God’s ultimate ownership of property—it’s a powerful, even radical, statement of stewardship. In Wells Fargo’s case, giving the Trump administration a brief PR victory with a well-timed news release serves a similar purpose, in that it highlights how closely tethered corporate profits are to advantageous governmental fiscal and regulatory policy.

In other words, celebrations of corporate giving inspired by the tax bill point to the fiscal giveaways in the bill itself. “The GOP Tax Scheme was a Very Merry Corporate Christmas Gift,” announced a headline on a recent op-ed by Patti Lynn, the executive director of the nonprofit Corporate Accountability. If that’s the case, then the announcements of corporate philanthropy in the bill’s wake suggest a holiday season ritual less reputable than the tenderhearted exchange of presents under the tree: it’s a hasty act of re-gifting, though in this case, second-hand donors have pocketed the bulk of the original gift for themselves.

-Benjamin Soskis

Benjamin Soskis is the co-editor of HistPhil and a research associate in the Center on Nonprofits and Philanthropy at the Urban Institute.

NOTES

[1] For more on the history of the Braddock and Homestead Carnegie libraries, see Paul Krause, “Patronage and Philanthropy in Industrial America: Andrew Carnegie and the Free Library in Braddock, Pa.,” Western Pennsylvania History, 71, no. 2 (April 1988), 127-146; and Curtis Miner, “The ‘Deserted Parthenon’: Class, Culture, and the Carnegie Library of Homestead, 1898-1937,” Pennsylvania History 57, no. 2 (April 1990), 107-135.

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