If billionaires made a one-time donation of $6 billion, could the problem of worldwide hunger be solved? The claim by the United Nations World Food Program that it could, prompted a “Twitter fight” between the agency and investor and entrepreneur Elon Musk, who with an estimated net worth of $221 billion, is the richest person on the planet.
Billionaire Elon Musk is the CEO of Tesla, the CEO and Chief Engineer of SpaceX, the founder of The Boring Company, and the co-founder of Neuralink and OpenAI. He claimed that he would sell $6 billion of Tesla stock and donate the proceeds to the UNWFP if they could show him how the money would obliterate hunger around the globe.
St. Jude’s Children’s Research Hospital
Musk is transparent about his donations at times. In 2021, he gave St. Jude’s Children’s Research Hospital $50 million and around $30 million to various public schools and nonprofits in South Texas, the location where rockets are built for SpaceX. He has a nominative foundation that is active with large gifts promised to a city near SpaceX, $100 million towards carbon removal, and $5 for Covid-19 research.
The Khan Academy
Musk also gifted $5 million to the Khan Academy, an American non-profit educational association. Created by Sal Khan in 2008, the Khan Academy creates short video lessons, online tools, and materials for educators. Khan said the funds will enable the organization to “accelerate all sorts of content” in 36 languages for around 120 million users worldwide. The academy operated at a deficit in 2021.
Khan says much progress has been made, but that billions more need a way to tap into their potential. “I view this type of investment in what we’re doing as really foundational for us to be able to build a multigenerational institution so that ‘future Elon Musks’ of the world are also able to tap into their potential and help all of us uplevel who we are as a civilization,” he says.
The Khan Academy has a library of standards-aligned practice and lessons covering K-12 through early college in math, grammar history, science, AP, Sat, and more. All of the resources are free to use.
Like many gifted students, public school was a challenge for Elon Musk. Consequently, education is an area of high interest for him. He founded a private institution called Ad Astra for his own children and the children of SpaceX employees.
His Biggest Donation Yet
In November of 2021, Musk donated about 5 million shares of Tesla stock to charity. The stock is worth $5.7 billion. According to UNWFP executive director David Beasley, they have yet to receive any donation from the Tesla CEO.
The incident has sparked debates around philanthropy concerning transparency, tax deductions, and where the money was donated. Some economic experts say the Tesla CEO likely donated to his DAF or donor-advised fund. DAFs are charitable investment accounts that allow donors to claim an upfront tax deduction without legally distributing the money.
According to economic strategists, this would be an advantage for Musk. The donation would allow him to claim as much as 30 percent of his 2021 adjusted gross income rather than 20 percent if he donated it to his foundation instead. Additionally, he could deduct the stock’s fair market value rather than its original value.
Experts say that the possibility Musk put the shares into a DAF brings up a questionable loophole that the wealthiest Americans often take advantage of. Billionaire and Philanthropist John Arnold, the co-founder of the Laura and John Arnold Foundation, Arnold Ventures, and others have formed a coalition to address this loophole. He says that although society is giving the wealthy the tax deduction to encourage bringing more resources to communities, the money isn’t getting there.
“The way that the tax law is structured today, it doesn’t necessitate that that happens,” he stated. “You can get the tax deduction today, and there’s no requirement for that money ever to get to the community.” Money given to a DAF can be kept in a tax-free investment indefinitely.
Tax The Rich
A group of bipartisan lawmakers has proposed a bill in the House of Representatives to limit the length of time donations in a DAF can remain untaxed. Last year, similar legislation was introduced in the US Senate.
Proponents against the changes say that the average 20 percent payout rate distributes money more robustly and faster than most private foundations whose average distribution is typically just slightly above the five percent per year required by law. That’s according to the Stanford Law School Policy Lab on DAFs.
Musk has also recently sparred with politicians such as Elizabeth Warren and Bernie Sanders over a proposed wealth tax.
Warren, Sanders, and other progressive Democrats on Capitol Hill have proposed a 3 percent annual tax on wealth exceeding $1 billion and a 2 percent tax on the net worth of households and trusts from $50 million to $1 billion.
“The ultra-rich and powerful have rigged the rules in their favor so much that the top 0. 1 percent pay a lower effective tax rate than the bottom 99 percent,” Warren said.
Benjamin Soskis, senior research associate in the Center on Nonprofits and Philanthropy at the Urban Institute says has suggested that Musk should be more transparent about where his gifts go. Since DAFs allow donors to remain anonymous, some philanthropy historians say Musk’s donation is starting a trend of lack of disclosure about where larger gifts are going.
Elon Musk is admired for a host of accomplishments during his lifetime. With financing from investors, Musk and two others created Zip2, an online software business in 1995. They worked from a small rented office in Palo Alto, CA, and created and sold an Internet city guide with maps, directions, and yellow pages for the newspaper publishing sector.
Today, according to the Bloomberg Billionaires Index, Elon Musk’s fortune is $47 billion more than Amazon founder Jeff Bezos, the world’s second-wealthiest person. Most of his wealth is tied to Tesla. The electric vehicle manufacturer overtook Toyota Motor Corp. in July of 2020 as the most valuable automaker in the world.