Hard to give away a dollar effectively

Wednesday, 7 September 2011

I’ve always had a soft spot for Mpilo Desmond Tutu. I first met him in December 1981 as a young reporter at the funeral of murdered Durban lawyer Mlungisi Griffiths Mxenge which took place at Rayi near King Williams Town. There were thousands upon thousands in the funeral crowd, and among these was a person who was fingered by those around him a black security policeman. The crowd pounced upon him with the tenderness of raging pitbulls. And then, in a dramatic recreation of Moses parting the Red Sea, Tutu cut a swath through the multitudes and shielded the spy with his own body. Such was the force of his personality that the throng subsided.

So when our media assailed us last month with reports of “Tutu’s call for wealth tax for whites”, I chuckled. This was one of Tutu’s finer moments. In a flash, he had shifted the focus from Julius Malema (who had said the same thing with malice), to himself (who said it with a smile).

What did Tutu say? He confirmed he was calling for a wealth tax. But he was hoping that whites themselves would “agitate” for it to be imposed upon them.

Interestingly, this tied in with something said by Warren Buffett a day later. Buffett is ranked third richest man in the world with a personal fortune of US $50 billion. He called for the very wealthy, himself included, to pay higher taxes.

Writing in the New York Times, he said:

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“ Last year my federal tax bill — the income tax I paid, as well as payroll taxes paid by me and on my behalf — was $6,938,744. That sounds like a lot of money. But what I paid was only 17.4 percent of my taxable income — and that’s actually a lower percentage than was paid by any of the other 20 people in our office. Their tax burdens ranged from 33 percent to 41 percent and averaged 36 percent. If you make money with money, as some of my super-rich friends do, your percentage may be a bit lower than mine. But if you earn money from a job, your percentage will surely exceed mine — most likely by a lot.
“For those making more than $1 million — there were 236,883 such households in 2009 — I would raise rates immediately on taxable income in excess of $1 million, including, of course, dividends and capital gains. And for those who make $10 million or more — there were 8,274 in 2009 — I would suggest an additional increase in rate. My friends and I have been coddled long enough by a billionaire-friendly Congress. It’s time for our government to get serious about shared sacrifice.”

His views are not dissimilar to those of George Soros who has a fortune of US $24 billion: “I have made it a principle to pursue my self-interest in my business, subject to legal and ethical limitations, and to be guided by the public interest as a public intellectual and philanthropist. If the two are in conflict, the public interest ought to prevail. I do not hesitate to advocate policies that are in conflict with my business interests.

“I firmly believe that our democracy would function better if more people adopted this principle. And if they care about a well-functioning democracy, they ought to abide by this principle even if others do not. Just a small number of public-spirited figures could make a big difference."

There are 28 known billionaires in South Africa. Mining magnate and Sundowns owner Patrice Motsepe tops the list with R22 billion followed by Indian steel magnate Lakshmi Mittal with R20 billion. But even if they gave away large chunks of their fortunes, what would happen?

Steve Jobs, Apple’s founder, spoke about this issue in a 1985 interview with Playboy magazine.

“It’s a large responsibility to have more than you can spend in your lifetime – and I feel I have to spend it. If you die, you certainly don’t want to leave a large amount to your children. It will just ruin their lives…
“Almost everyone would think that he could invest the money back into humanity in a much more astute way than the Government could. The challenges are to figure out how to live with it and to reinvest it back into the world, which means either giving it away or using it to express your concerns or values.
“I’m convinced that to give away a dollar effectively is harder than to make a dollar. There are some simple reasons for that. One is that in order to learn how to do something well, you have to fail sometimes. In order to fail, there has to be a measurement system. And that’s the problem with most philanthropy – there’s no measurement system. You give somebody some money to do something and most of the time you can really never measure whether you failed or succeeded in your judgment of that person or his ideas or their implementation. So if you can’t succeed or fail, it’s really hard to get better.”

And that cuts to the heart of the matter. It’s not about whether Motsepe or Mittal or Oppenheimer give away vast chunks of their wealth to the government or to charity — it is about how to ensure that that money is a hand up and not a handout.