All of which is why now would a very good time for Alice, Rob, Jim, Christy, John and Lukes Walton to perform a great public service on a grand scale. They need not match the largess of Warren Buffett and Bill Gates, who have already donated 27 and 36 percent of their fortunes to charity and have taken the Giving Pledge to give away half their wealth in their lifetimes. A mere $5 billion dollar grant from the Walton clan, or just 3.6 percent of their combined $140 billion fortune, equal to the total worth of over 40 percent of the American people, would be a good start. For that comparatively paltry sum, the Walton family could save Detroit.
Follow below the fold for the details of how this could work.
One of America's great cities, Detroit has fallen on hard times. Home to 1.8 million people in 1950, the Motor City has shriveled below 700,000 as the deindustrialization of the Rust Belt and the global transformation of the auto industry gutted the once proud metropolis. Savaged by the Great Recession that began in late 2007, Detroit was forced to enter bankruptcy.
And salvaging a city with a vanishing tax base and withering public services will require a lot of money. This week, Michigan lawmakers approved a $195 million state contribution to a package designed to help protect retiree pensions, pay creditors and preserve the priceless collection at the Detroit Institute of Art. As the Detroit Free Press described the "grand bargain":
The state's proposed one-time contribution -- calculated as the equivalent of $350 million over 20 years -- would be combined with $366 million pledged from charitable foundations and $100 million from the DIA. At least two union organizations also have pledged unspecified financial support in response to a request from House Speaker Jase Bolger, R-Marshall. And Rosen announced Tuesday that the Skillman Foundation had pledged nearly $4 million to the grand bargain, upping the total foundation support to $370 million.(It is worth noting that the Skillman Foundation joined the Ford Foundation and the Kresge Foundation in the grand bargain in order to help defray healthcare cuts to retired workers and the children. In contrast, Americans for Prosperity, funded by the same Koch brothers whose petroleum coke storage facility continues to pollute the city, demanded the DIA sells its multibillion dollar art collection to help Detroit pay off its creditors.)
While emerging from bankruptcy will give Detroit a pulse, the long-term health of Michigan's largest city is far from guaranteed. As a federal task force warned just last week, cleaning up the residential and industrial blight plaguing the Motor City could cost $2 billion over the next five years. As the New York Times reported:
A task force convened by the Obama administration issued the most detailed study yet of blight in Detroit on Tuesday and recommended that the city spend at least $850 million to quickly tear down about 40,000 dilapidated buildings, demolish or restore tens of thousands more, and clear thousands of trash-packed lots.Detroit doesn't just suffer from a mind-boggling 85,000 blighted or nearly blighted structures and vacant lots. As the Free Press explained, "93% of the tens of thousands of tax-foreclosed Detroit properties held by the city, county and state are in really bad shape and should be knocked down or cleaned up, the report said." And so far, the roughly $450 million the city has identified (most of it from the federal government) to tackle the blight epidemic is a drop in the bucket.
It also said that the hulking remains of factories that dot Detroit, crumbling reminders of the city's manufacturing prowess, must be salvaged or demolished, which could cost as much as $1 billion more.
Which is where the Walmart clan and their Walmart Family Foundation could come in to save both their good name and a great American city. While the Waltons do give money to other charities, the six siblings combined have contributed a minuscule $59 million—just 0.04 percent of their total wealth—to the foundation that bears their name.
The central finding of this report is simple: Our analysis of 23 years' worth of the Walton Family Foundation's tax returns shows that Rob, Jim, Alice and Christy Walton--the second generation Walmart heirs--have contributed almost none of their personal fortune to the foundation which bears their family name.
To be sure, the Crystal Bridges Museum in Bentonville and its educational programs for poor children are impressive. The $1.2 billion complex and its $500-million collection of American art are world class. But Alice Walton's hobby was made possible by what Forbes previously described as the "tax-minimizing Walton Family Foundation." Nevertheless, in a fawning October 2013 profile NBC News' Harry Smith said of America's richest art collector, "the little girl who used to catch crawdads in a Bentonville creek" is giving back. As she put it:
"I remember what my mom told me. She'd say, 'You know Alice, if you give the thing you love most, you will be giving the right gift.'"But the thing Alice Walton really loves the most—and the thing American taxpayers for sure need most—is money. And that she has no intention of giving.
GRATs work by rapidly shifting large volumes of stock into a trust fund that is legally required to return that initial investment after two years. The stocks in the trust gain enough value that when it comes time to repay the initial investment there is a substantial amount of stock left over that can be transferred on to some third party without triggering the gift tax.
The best way to reduce paying estate taxes is to give your assets away before they appreciate.As it turns out, his daughter Alice Walton has even better way: Get rid of the estate tax altogether.
With their combined wealth now estimated at $139.9 billion dollars, on paper zeroing out the 40-percent state tax would allow the Waltons to redirect roughly $56 billion from the United States Treasury into the accounts of their heirs. (Because of tax avoidance techniques used by the very rich, the effective estate tax rate is closer to 17 percent.) All those zeroes explain why Alice Walton had been trying to kill the estate tax for years. As USA Today summed it up in 2005:
Led by Sam Walton's only daughter, Alice, the family spent $3.2 million on lobbying, conservative causes and candidates for last year's federal elections. That's more than double what it spent in the previous two elections combined, public documents show.That was before the Walton joined Mitt Romney's billionaire SuperPAC-Men dedicated to doing away with the estate tax once and for all. And that was before the Great Recession savaged the finances of working Americans while making Walmart and the Walton clan much richer still.
The Waltons have joined a coterie of wealthy families trying to save fortunes through permanent repeal of the estate tax, government watchdogs say. The election of President Bush and more conservatives to Congress gave momentum to the long-fought effort. The Waltons add more.
As labor economist Sylvia Allegretto of the University of California and Josh Bivens of the Economic Policy Institute documented in 2012, the fed's Survey of Consumer Finances (SCF) showed that the crippling recession that began five years earlier had been a bonanza for the Walton Six. Between 2007 and 2010, the wealth of the Walton family members jumped from $73.3 billion to $89.5 billion even as median family wealth fell by 38.8 percent. The result?
In 2007, it was reported that the Walton family wealth was as large as the bottom 35 million families in the wealth distribution combined, or 30.5 percent of all American families.Thanks to the stock market boom under President Obama, the Waltons' wealth continues its rise into the stratosphere.
And in 2010, as the Walton's wealth has risen and most other Americans' wealth declined, it is now the case that the Walton family wealth is as large as the bottom 48.8 million families in the wealth distribution (constituting 41.5 percent of all American families) combined.
Now, there is nothing wrong with Alice Walton using some of her vast fortune to create a free art museum for "the people who have not been comfortable." But given the facts that (a) the rich give a much smaller share to charity than the less well-off; (b) the wealthy pocket the lion's share of the federal charitable tax deduction, and (c) "Last year, not one of the top 50 individual charitable gifts went to a social-service organization or to a charity that principally serves the poor and the dispossessed," it's only natural for Americans to ask why their tax code so heavily subsidizes Walton's Crystal Bridges. As for the estate tax so despised by Alice Walton and her ilk, analyses consistently show that higher rates not only generate more tax revenue but encourage greater charitable giving.
For its part, the Walton Family Foundation has defended the record of largesse from Sam's kinfolk at Walmart:
Since 1987, the Walton family has contributed more than $5 billion to charitable organizations and causes. Family members living and deceased have provided generously for the foundation. The family has planned for the continued growth of the foundation and intends for grant making to progressively increase over time.Given Walmart's terrible, horrible, no good, very bad week in the media, the Walton family might want to add a $5 billion check to the Motor City to its plan for "progressively increasing" its grant-making over time. That would be a good way for the Walton heirs to begin to atone for their morally monstrous record of charitable giving in the past. To put it in terms Walmart's owners could understand: Save Detroit. Live with Yourself.