Topic: Sweden

country in Northern Europe

  • True Diversity Advocates Respond to Supreme Court Affirmative Action Decisions

    In 6-3 and 6-2 rulings, the U.S. Supreme Court struck down the use of race-based preferences in college admissions, writing “The Harvard and UNC admissions programs cannot be reconciled with the guarantees of the Equal Protection Clause.” 

    President of Students for Fair Admissions Edward Blum, the organization that filed the lawsuits, applauded the ruling, saying, “The polarizing, stigmatizing and unfair jurisprudence that allowed colleges and universities to use a student’s race and ethnicity as a factor to admit or reject them has been overruled. These discriminatory admission practices undermined the integrity of our country’s civil rights laws.” 

    The Roundtable compiled reactions from our True Diversity partners, who signed our statement of principles. The True Diversity initiative provides an equality-based, holistic framework for embracing diversity that values each person as a unique individual and empowers charitable organizations with the freedom and flexibility to advance their missions and help those in need. Read the Roundtable’s official statement on the ruling here.   

    Ian Rowe, senior fellow at the American Enterprise Institute and founder and CEO of Vertex Partnership Academies, which is a charter school serving high school students in the Bronx, said: 

    “Years from now, Black students admitted to top schools will say thank you Supreme Court for a decision that removes the perception the only reason I got in is due to my race. You re-established merit as the core criteria to be considered against a standard bar of excellence.” 

    For more from Rowe on how to provide pathways to opportunity for disadvantaged individuals, check out his book “Agency: The Four Point Plan (F.R.E.E.) for ALL Children to Overcome the Victimhood Narrative and Discover Their Pathway to Power.”  

    Devon Westhill, president and general counsel of the Center for Equal Opportunity, whose mission is to “promote colorblind equal opportunity and nondiscrimination in America,” said: 

    “The Harvard and UNC cases provided the Court a great opportunity to clean up the mess it created by its decades-long experiment permitting a racial spoils system in college admissions. It has now seized the opportunity—on the 20th anniversary of its misguided Grutter opinion—to vindicate the American principle of equality under law. As a result, today we are a more perfect union, notwithstanding more work that lies ahead.” 

    The Center for Equal Opportunity filed amicus briefs in support of the plaintiff at every stage of these cases. Check out Westhill’s recent blog on this topic, entitled “Shall We Overcome: What is the Alternative to Affirmative Action?” 

    Stephanie Holmes, an experienced labor and employment lawyer and founder of BrighterSideHR, said: 

    “While the Court’s decision today is not directly applicable to the workplace, employers should take notice. Race-based preferences in the employment context have always been prohibited under Title VII of the Civil Rights Act of 1964, which is the provision applicable to employment. In recent years, however, the proliferation of Diversity, Equity and Inclusion (“DEI”) programs in corporate America, while well-intentioned, have increased the focus on an employee or applicant’s race or sex. This has provided incentives for employers to make hiring or other employment decisions based on protected categories, such as race, which is unlawful.   

    The Court’s majority opinion underscores the value and importance of treating all people – all employees – as the unique individuals they are in order to fulfill the promises guaranteed to every American in our Constitution. Even though the Supreme Court’s decision does not change existing law in the employment context, employers should be prepared for increased focus on and questions around their DEI approach. Employers are encouraged to use this opportunity to review their diversity programs and be prepared for questions from employees, who may have a wide variety of opinions on this topic.”   

    For more from Holmes, an author of our True Diversity toolkit, please read “True Diversity: Legal Overview & Recommendations for Employers.” 

    Pacific Legal Foundation, a nonprofit that defends Americans’ liberties from government overreach and abuse, responded to the ruling in a Fox News op-ed. Legal fellow Ethan Blevins said: 

    “While this is a key win for individual rights, the court did not go far enough. The court should have held that race can play no role in university admissions whatsoever. Instead, the court has opted to prop up a feeble precedent that leaves the door ajar for ongoing discrimination.” 

    Pacific Legal Foundation filed an amicus brief in favor of SFFA in these cases. Read more about their  litigation efforts here.  

    Patrice Onwuka, Philanthropy Roundtable adjunct senior fellow and director of the Center for Economic Opportunity at the Independent Women’s Forum, said: 

    “As a society, we cannot remedy past discrimination by creating new inequities; otherwise, we lock ourselves into a vicious cycle of injustice. Today, the U.S. Supreme Court affirmed that educational institutions must not infringe on the civil rights of one group of students based on their race regardless of whether some view the desired outcome as virtuous.   

     “Every child in America deserves access to a quality education regardless of race, ethnicity, national origin or class. Education is not only an equalizer, but it anchors the ladder of economic opportunity. If we want to ensure that disadvantaged children, including those from minority backgrounds, can compete for spaces in higher education, we should accelerate school choice efforts and be committed to holding all kids to the same high standards.”  

    For more from Onwuka on this topic, read her Philanthropy Roundtable research on the effectiveness of diversity quotas on corporate boards in “Improving Board Diversity: Lessons from Sweden and Norway.” She has also written about the pitfalls of charitable organizations collecting demographic data and using it to make philanthropic decisions. Read more here. 

  • The Return of the Wealth Tax Debate

    Can the government tax charitable assets? A court case put before the U.S. Supreme Court may hold the answer to this question. By considering whether unrealized assets can be taxed, the courts could open the door for a new wealth tax covering assets within private foundations or charitable trusts.

    The U.S. Court of Appeals for the Ninth Circuit recently sidestepped the equal apportionment clause of the 16th amendment by becoming the first court in the country to state that an “income tax” doesn’t require that a “taxpayer has realized income.” In other words, this opens the door to the possibility that you can be taxed on income you didn’t receive (yes, you read that right).

    Last week, Competitive Enterprise Institute petitioned the U.S. Supreme Court to take up the issue in Moore v. United States.

    To understand what is at stake, we begin with investments. When the value of stocks and investments rise but are yet to be sold, they are called unrealized investment gains. These gains are not taxed according to current tax regulations until the investment is sold and the capital gains are realized.

    To illustrate, let’s say you purchased a painting for $1,000, and after a year, its market value rose to $1,500. As long as you haven’t sold the painting, the $500 increase in value is considered an unrealized gain, and you don’t need to pay taxes on it.

    The decision by the Ninth Circuit, if not overturned, could usher in a new era of federal taxes being imposed on properties, stocks, appreciating assets, possibly even jewelry, artwork, vehicles and household furniture.

    What’s more, opening the door to the possibility of imposing federal taxes on wealth would have profound implications for the charitable sector.

    Emmanuel Saez and Gabriel Zucman, two well-known French economists who have provided advice to Senators Elizabeth Warren and Bernie Sanders regarding their proposed wealth tax plans, have suggested a new approach to calculating tax bills for wealthy Americans. This new approach would consider not only the personal assets of these individuals, but also the assets of their charitable foundations.

    The change would be significant, given that American charitable foundations provided  $91 billion to nonprofit organizations in the previous year. If wealthy individuals’ foundations were to see a reduction in assets, the communities currently benefiting from those donations would experience a substantial (negative) impact.

    In 2019, the National Taxpayers Union Foundation conducted an analysis of Warren’s proposed wealth tax on charitable foundation assets and found the tax would consume between 6% and 25% of the annual disbursements of five selected foundations, including the Dell Foundation, the Omidyar Network and Dalio Philanthropies.

    The history of wealth taxes suggests they are not effective and are frequently abandoned due to the economic damage they cause. Fifteen European countries have introduced wealth taxes over the last century, but only three still enforce them.

    In 2017, France eliminated its wealth tax after the prime minister acknowledged it was prompting the departure of 10,000 to 12,000 millionaires each year. This tax impeded economic growth and contributed to just over 1% of overall tax revenue, which is an inadequate return for the cost.

    Sweden, which is often cited as a progressive policy model, had a wealth tax for almost 100 years before abandoning it in 2007. The tax had virtually no effect on government finances while being blamed for significant capital flight. Germany also had a wealth tax, but it was deemed unconstitutional and abolished in 1996. Wealth taxes have not proven successful worldwide, and it remains uncertain whether the U.S. Constitution grants Congress the authority to impose such a tax.

    The 16th Amendment says “taxes on income” do not need to be apportioned among the states. This likely means that other federal taxes, such as a tax on unrealized capital gains and other wealth taxes, must be applied equally to all 50 states, according to population.

    Alabama, which makes up roughly 1.5% of the nation’s population, would have to produce roughly 1.5% of the revenue raised by the tax. But Alabama and seven other states have no billionaires, and California and New York combined have 43% of them, so equally apportioning the tax among the states would be impossible.

    As the decision by the Ninth Circuit Court is petitioned, the Supreme Court may issue a decision on this matter — it could have profound implications on the possibility of federal wealth taxes being imposed on the unrealized assets of Americans.

    Whether we consider the economic costs of a tax on unrealized capital gains, the historical precedent of nations abandoning wealth taxes or the question of constitutionality, the result would be less economic growth, fewer jobs and a significant reduction in philanthropic giving.

    To learn more about the impact of wealth taxes on charitable giving, read our policy primer here.