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Comment by kristianp | Hacker News Reader

It is just insane that 1.8B should be spent on just Johns Hopkins. This doesn't sound like anywhere near the most efficient way to help the most students who are missing out on places because the institution looks at their ability to pay. Does Bloomberg have an alterior motive to limit his donations to just his Alma Mater? Does he just want a wing of the library named after him or something? I'm frustrated reading this article, it compares poorly to the Gates foundation model of trying to help the maximum number of people per dollar.

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> Does he just want a wing of the library named after him or something

No, as there are already numerous Hopkins things bearing Bloomberg's name for many years -- including a 7-story physics/astronomy building, and the entire graduate public health school. The new $1.8B is in addition to previous total gifts of $1.5B.

Bloomberg previously established a scholarship program for high-achieving incoming undergrads, but it was limited in size to a few dozen students a year. It sounds like the new money will allow this to expand to all students in need. Some universities like Harvard already did this, but Hopkins never did, due to its endowment being smaller than its peer institutions.

This could be very good for the future of Baltimore. Many decades ago, a decent percentage of Hopkins undergrads came from Baltimore public schools, and that percentage has plummeted precipitously as Baltimore's fortunes declined.

I do understand your overall point, but it's Bloomberg's money, and it's his decision how to spend it. I'd also suspect he gives money to other causes, although perhaps not on this scale.

> it's Bloomberg's money

A large chunk of that money is subsidized by tax payers, as he would not keep the 1.8 Billion if he had bought a sports team or other vanity project that was not tax deductible.

I am not saying spending taxpayer money to promote giving is a bad idea, but it is an expensive one that’s generally forgotten about.

I don't follow this line of reasoning. It's his money, not taxpayer money. If he simply held on to the money, he would not owe additional tax on it either.

Perhaps it will eliminate his personal tax bill for 2018, but his yearly income is far less than $1.8B, and his tax bill is only a portion of his yearly income... the tax implications of this gift are only a small portion of the amount.

Unless he is an idiot, he donated aprecated assets like stock. If he sells the stock he needs to pay taxes on that stock. That’s true even if he buys something by directly handing someone stock.

Even if he had 1.8 Billion in cash and ‘only’ got to deduct from his current tax bill that still means the US population is giving up money to support his cause.

Taxes are not about the government. They are a shared burden by tax payers and anyone paying less is increasing that burden for everyone else. The only way to reduce it is for the government to sped less money.

> If he sells the stock he needs to pay taxes on that stock

He would need to pay tax on the capital gains. We have no way of knowing what the stock's cost basis is.

For sake of example, let's say the $1.8B had a cost basis of $1B. In theory the tax bill would be $160M. While that's a decent chunk of change, I definitely wouldn't describe it as "a large chunk" of the $1.8B being "subsidized by tax payers".

Also keep in mind the ultra-wealthy have all sorts of tax avoidance schemes anyway, and regardless of what he spent this money on, he is likely paying a much lower taxation rate than you or I (or the example above). That's a separate topic though.

In that hypothetical situation, 160M would only be part of his deduction, he would also reduce other tax burdens due to the charitable deduction also applying.

Also, I would call 0.16 billion a large chunk of 1.8Billion as it would drop that down to 1.64 billion.

Anyway I would not call a basis of 1B out of 1.8B a highly appreciated assets. If he wants to keep a more appreciated asset with a basis of say 1/2 or 1/10th it's current price as a better long term investment you can still do this. Donate the highly appreciated stock, sell some less appreciated stock and use the proceeds to buy the stock you want which now has a much higher basis.

Then if the stock you buy tanks you can at least take a deduction when you sell it.

Taxes are the art of plucking the goose as to get the most feathers with the least squawking. I am not on the side of rationalizing why somebody 'owes' taxes on money already taxed.

I am not saying he needs to pay more. I am saying the charitable deduction like all deductions are effectively just another form of spending.

We hand out money to people buying a Tesla Model S’s, or paying a mortgage payment. Agree or disagree with the idea, just understand it’s not free.

Except 'Not collecting money' and 'spending money' are not quite the same thing. Almost, but not quite.

IRS considers debt forgiveness income. https://www.irs.gov/taxtopics/tc431.

So, legally they are the same thing.

PS: Though with various caviots as the law is never that simple.

If I’m understanding you correctly, it should be noted that paying for something (or donating to something) that does not require you to pay taxes is not the same thing at all as using taxpayer money. It’s not subsidized, is it? It’s just not taxed. (Do correct me if I’m wrong though.)

If you donate 100 $ and then get X dollars rebated from your taxes you donated 100 - X dollars.

What do you think should be the difference in tax between a rich business owner donating money directly from their company, and a regular joe donating money from their paycheck?

And what do you think the current difference in tax is?

I am not making an argument for what should be, only what is.

Companies also get tax deductions. Should or should not is a different issue, but currently they do.

I disagree. Good behavior starts at the top. When all the best universities go need-blind and start offering only need-based scholarships, the bad actors in the education system will be left out on their own and we can start dealing with them separately.

The money will go to a school which likely could not possibly go bankrupt based on their current endowment. It could be much better spent across hundreds of state schools who do not have the same liberty or vaults.

Public schools shouldn't be dependent on the whims of philanthropic billionaires. They should be supported by the state. It goes against everything they were set up as.

Is anyone arguing that "Public schools should be dependent on the whims of philanthropic billionaires"?

If you follow the chain you replied to, born_a_beetle is saying that a consequence of such a donation to a state school would be a dependence on Bloomberg that is inappriate for public education. It’s clear that he or she is concerned about that as an unintended consequence of such a donation. No one is advocating for the unintended consequence to happen, but they are arguing for a course of action that born_a_beetle believes will have the negative consequence.

There’s a good article on unintended consequences here: https://en.m.wikipedia.org/wiki/Unintended_consequences A lot of debate in philanthropy policy deals with these, so it’s important to understand how someone can disagree with something no one has explicitly advocated for, but could happen if the advocated course is taken.

Thank you, very well put. (I really should've stayed out of this issue about which I know nothing.)

Sure, I get that it might have undesirable consequences, like creating a harmful habit or addiction, but also 'such a donation to a state school' would mean (obviously) a relatively poor school gets a lot of money, which seems to me a good thing. No?! It almost seems like people are saying....that all mega-donations should go to schools that already have lots of money. Which does seem going overboard a bit.

Yes, I do agree that state schools also need alum support. The large public universities I’m familiar with have plenty of buildings named after wealthy people and are facing budget crises that affect affordability, so they could use more money.

I could see trouble if a state school doesn’t effectively manage endowments and receives too much money to handle, but as long as proper governance exists elsewhere, I don’t see how concentrated donor influence could hurt the school more than the money would help, even if the money weren’t allocated as well as it could’ve been.

I feel it will more cement the status of the best universities. Most of them already have huge endowments. They don't need the money.

1.8B is not that much, really. at 50k tuition, that's only 36k people.

There's only 5407 undergraduates at JHU[1] (for all years). If 10% of those qualify for aid that's 541 in total. Nowhere near 36k people. If we assume a degree takes 4 years, then 137 per year of intake, then those 36k people would be spread over 263 years.

[1] https://apply.jhu.edu/discover-jhu/get-the-facts/

Coincidentally (or not?), Harvard's equivalent program has awarded $1.8B in need-based grants since it was launched in 2005 [1]. Perhaps that gives a rough ballpark of how long this amount of money will last.

[1] https://news.harvard.edu/gazette/story/2018/03/the-personal-...

Thats 36k people for a year....

Also you probably need to factor in living allowance if supporting underprivileged and once you give a scholarship you're looking at a 3-6 year commitment to that person.

Plus if you want the scholarships to run in perpetuity you can only spend at a rate that keeps the endowment at certain payout rate that does not reduce its value + inflation

So at say 6% being spent a year, divided by $80k to cover tuition and living cost, average 4 year course commitment your looking at 338 new scholarships a year.

That whittles down fast doesn't it....

Or in perpetuity it could be about 4% of 1.8B per year. Which is only 360 students per class though (assuming a 4 year scholarship). Maybe that's 360 kids that wouldn't have otherwise been able to go to Johns Hopkins.

Yeah, sad to see it go to just one university with those kinds of numbers.

Had it been spread to low-cost universities and community colleges, those numbers could have easily been 10x. And wouldn't require the son of a farmer to relocate to one of the highest COL states in the US. Or a daughter from someone in Detroit (went back to find the details of that anecdote and got locked out from paywall).

Hey as long as we're calculating here, let's talk about 1.8B as tax revenue. What tax rate would that be for someone like Bloomberg? Now apply that across the board to everybody making that much, how much tax revenue does it come out to? Extrapolating even further, based on today's split of public money going to education, what would this mean for public school (including universities) funding?

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