The Dumb Tax

 In Education, Family, Foundations, Fred's Blog, Giving, Money, People, Philanthropy, Trust, Young Givers

Listen to “The Dumb Tax” by Fred Smith

 

“Where’s the elevator?”

The donor looked up the empty shaft in the nonprofit’s new building his family’s foundation had helped to fund. Paying for the elevator had been one of the larger grants of the foundation and they had struggled with the decision of whether or not to underwrite something that was not a direct service. But the family loved the leader of the ministry and had been caught up in his description of the need.

The elevator?”

“Yes, the one we sent $50,000 to install in this new building.”

Well, it’s a long story, but we had more pressing needs and knew you would understand. We know that may seem strange to you to change where the money went but in our culture we have to do things differently sometimes.”

When I was told this story it was the first time I thought about the “dumb tax” we all pay sooner or later. We are charged the dumb tax because we didn’t ask enough questions, made too many assumptions, fell in love with a project, or failed to understand the issues before we wrote the check.

It’s not meant to be harsh. It doesn’t mean we are stupid. There is a difference between being dumb and being plain stupid. It just means we have all been uneducated about how we have given our money one time or another.

You’ve probably read about Mark Zuckerberg’s $100 million grant to New Jersey public schools and the sad results. At least $20 million was spent on consultants and the balance was committed not to reform but to union contracts for teachers ($40 million) and principals ($40 million). Even though the grant to create the Foundation for Newark’s Future was seen as a “one-time shot in the arm” and not a long-term solution, the deal began to unravel almost as soon as the first check was delivered.

I can picture Mark Zuckerberg looking at the gaping hole left in the New Jersey school system and asking, “Where’s the elevator?

Tuition – Not Tax

The Newark fiasco is a classic case of a young, inexperienced donor paying the dumb tax. No matter the size of the grant – or how good the donor has been at making money in his business – there are a number of common mistakes we all make that leave us wondering what happened to the original intent of our gift.

First, we want to do something big and make a splash with very little preparation. Zuckerberg wanted to revolutionize urban education and was looking for a place to do it. Newark just happened to be the one he picked. He knew nothing about urban public education or even philanthropy at the time.

In the article ”Schooled” in the New Yorker, Dale Russakoff writes, “He’d never visited Newark, but he said he planned to learn from the experience and become a better philanthropist in the process.”

Second, we are introduced to charming and committed visionaries who are vouched for by others. As Zuckerberg said about then Mayor Corey Booker after only two meetings, “This is the guy I want to invest in. This is the person who can create change.” Everyone advising and helping him had a vested interest.

Third, we are excited about change and want to move quickly. “Newark is really just because I believe in these guys. . . . We’re setting up a one-hundred-million-dollar challenge grant so that Mayor Booker and Governor Christie can have the flexibility they need to . . . turn Newark into a symbol of educational excellence for the whole nation.”

By the way, this was the first that Newark parents and teachers had heard about the revolution coming to their schools.

Fourth, we are convinced the principles and practices that made us successful enough to be giving the money will seem obvious to those we are determined to transform. We may know nothing about the culture and make naive assumptions about the likelihood of their receptivity to change. In this case, the entrenched unions and systems of the Newark school districts had no interest in change and all the leverage they needed to stop it was theirs.

Finally, we do not consider – or we discount – disruptions that may affect the plan. Chris Christie was soon caught up in his own scandal involving his Presidential aspirations and Corey Booker was distracted by running for the Senate. Neither of them had the time or bandwidth to oversee the project.

While $100 million is only a small percentage of the nearly two billion dollars in gifts Zuckerberg and Priscilla Chan have made to the Silicon Valley Community Foundation (and about .0008 percent of his current net worth), it still stings. Hopefully, he and Priscilla stepped back and, having paid the dumb tax, they both assessed what they learned and decided the next expense would be tuition for learning instead of paying another tax.

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    Tony morgan
    Reply

    In my profession we always referred to the “dumb tax” as the U. S. estate and gift tax paid by the estates of folks who were too lazy or naïve to plan properly. While the tax is egregious, it’s possible to largely eliminate it with tim, resolve and planning.
    Hmmmmm, maybe there’s not a lot of difference in my use of the term and yours!

    • Fred Smith
      Fred Smith
      Reply

      I think we are on the same page. The dumb tax is a result of failure to pay adequate attention.

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