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Experts Argue That Philanthropy is an Ingrained Part of the Wealthy's Identity

At the turn of this century, Microsoft mogul Bill Gates Jr. and his wife, Melinda, announced more than $23 billion in donations over three years to their foundation, his father's foundation, the Hispanic Scholarship Foundation and the Global Fund for Children's Vaccines.

They did so while still living, in the prime of their adulthood, and as his company faced federal monopoly charges.

Before the turn of the previous century, John D. Rockefeller Sr. amassed a great fortune and had been deemed “the supreme villain of his age” because people believed he was corrupt and cruel.

But Rockefeller was able to cloud much of that history by pioneering a new era of charitable giving, establishing a $50 million foundation late in his life to promote “any and all of the elements of human progress.”

The foundation played a great role in eradicating hookworm, controlling malaria and stablishing educational and scientific institutions throughout the world.

“In the last part of the 19th century, the industrial age developed and we began to have a high level of wealth among a very few families,” said H. King McGlaughon Jr., a professor at American College, a financial services education institution in Bryn Mawr, Pa.

“At that time, they articulated a very tightly reasoned statement that wealthy individuals in the United States had an obligation to share their wealth in the community,” McGlaughon said. “It was a distinctive American vision as an obligation to avoid the excesses of European royalty as we build wealth in this country.”

Because of the promise of a democratic America of equal opportunities for the rich and poor, the nation's wealthy have come to view philanthropy as a core part of their identity. So say historians and wealth managers, who have observed an evolution in the motivations and intentions of philanthropists.

The rich are giving more today, these observers say, because they have more to give and because charitable giving has become an expectation for those who have prospered from the nation's opportunities.

“People of great wealth accumulation today made their money in the stock market,” said Jim Ferris, director of the Center on Philanthropy and Public Policy. “If they're going to have money, they're going to give it. People are tending to give it while they are alive and they have very firm views in what they want to do.”

One example is David Bohnett, a 47-year-old philanthropist who made a fortune by selling the Internet company he founded — GeoCities — to Yahoo Inc. Soon thereafter, he established a $30 million endowment for his David Bohnett Foundation, which gives grants for causes such as handgun control, voting rights, environmental protection and animal language research.

“I think like many people, if they're lucky enough to be blessed with some level of success, they want to make a contribution to society,” said Michael Fleming, executive director for the foundation.

“I think he very much felt like he owed the community, especially in Southern California,” Fleming said. “I think he felt he needed to give back. And I think there's really something tremendous about being alive and being able to see the difference that your generosity and involvement can make.”

Last year, Americans gave $240.72 billion to charities, according to a survey by the Giving USA Foundation. About half of that sum comes from people in the top 10 percent earning bracket. Since 1998, charitable giving has made up 2 percent of the nation's gross domestic product. Bequests to charities made in wills make up about 10 percent of this sum.

“The demographics are changing,” Ferris said. “People are earning money at younger points in their lives and the economy is changing. More people are involved in philanthropy and it's not as concentrated. Money is changing hands between generations and there's just a greater capacity.”

And they're giving more today because philanthropy and contributions to charitable causes has become enmeshed in America's cultural fiber, argued Paul Schervish, director for the Center on Wealth and Philanthropy at Boston College.

“This is not just something that individuals have on their plate and discover it to be something important for them one by one,” Schervish said. “It's something that friends talk about and read about and financial planners inquire about when doing financial plans. So this cultural phenomenon means that a number of people are doing it because of the thought of doing so and aspiration of doing so and rewards of doing so are presented to people in society.”

This is different from many of the magnates of yesteryear, many of whom accumulated wealth and wondered what to do with it right before death.

Waldemar Nielsen, who advised John D. Rockefeller III, J. Paul Getty and other philanthropists, wrote in his book “The Golden Donors” that “about half of the large foundations were created in part out of a strong charitable motivation and sense of civic or social responsibility.”

“But in half the cases or more, the donors endowed their foundations simply because they were running out of time, were drowning in money, and were unable to think of anything better to do with it.”

Only about a third of foundations, he wrote, had specific purposes. And quite a few of them, such as the ones founded by Henry Ford and John MacArthur, had no identifiable charitable purpose.

According to Nielsen, MacArthur once told trustees: “I'll make the money. You guys will have to figure out how to spend it.”

Today's wealthiest philanthropists — such as the Gates family — are much more hands-on and have specific goals in mind, from improving inner-city schools and enhancing science education nationwide, to reducing infectious disease worldwide and decreasing maternal mortality in developing nations.

“My feeling is that people are being more careful about directing the kinds of things that they want their money to go into,” said Palmer Moe, executive director for the Kronkosky Foundation in San Antonio.

Philanthropists of today view their charitable giving as an extension of their self-identity, Schervish said.

“What you focus on and why you get interested is what I call identification, and that's true for wealth holders and for the middle-class and lower-income people as well,” Schervish said. “That is, how do you see the fate of those you are looking to help as connected to your own fate? You find in major gifts some familial imagery used.”

That's why Bohnett — who is gay — contributes to causes promoting the positive portrayal of lesbians and gay men. And that's why Gates — a computer scientist — is working on establishing science magnet high schools across the nation through his foundation.

All classes of Americans have come to see charity as a cornerstone of American values because it has always been a part of the American vision, said Joe Lumarda, executive vice president of the California Community Foundation.

“It took a long time for us to develop this culture of association, organization and activism, where we felt empowered as a democratic society and said if the government not going to take care of something, then we will,” Lumarda said. “It doesn't matter if it's spotted owls to homeless children, these guys are doing something that the government isn't.”

Lumarda and his colleagues argue that this sense of duty originated with the founding of the nation.

“Puritans in Massachusetts had as part of a written framework of government an ideal of charity that set forth a goal that everybody would share their worldly possessions,” McGlaughon said. “So from the very beginning there was a core principal that held up charity as a core concept in the new country.”

These principals were formal and informal, and became codified in the nation's tax code in the early 1900s with the establishment of the income and estate taxes.

“The formalization of charitable giving and being recognized by the tax code, being the only deduction at that time (in the income tax), it made good business and society sense at the time,” Lumarda said. “A lot of these guys, the Carnegies and Rockefellers, they gave to their churches and schools, but now could take a broader point of view.”

And while the tax code's deduction of dollars given to charities has “kick started” philanthropic and charitable contributions in the 20th century, they may no longer be needed, Lumarda and Schervish have argued.

“If you want to do good with your wealth, you want to provide for yourself and your spouse and provide for your children,” Schervish said. “And when you've settled that, what do you want to do next? You attend to those areas you've identified with as if those were your children. So you see who else are your heirs, your moral heirs, in a way.”

Schervish said that because the wealthy have come to see philanthropy as a core part of their identity, the repeal of the estate tax would not have a negative impact on charitable giving.

That is counter to studies by the Congressional Budget Office, which estimated that charitable contributions could drop by $12 billion to $24 billion a year. One study shows that if the estate tax were repealed, that would cause charitable bequests to fall by about 12 percent. Another estimates that charitable bequests could fall by 40 percent and another shows a 22 percent drop.

Local estate planning and tax attorney Richard E. Goldsmith said while it's true that the very wealthy will continue to contribute to charitable causes because of a sense of noblesse oblig