Michael Hiltzik: A billionaire shows his peers a better use of their wealth than buying crummy art

Michael Hiltzik, Los Angeles Times on

Published in Business News

On this side, art dealer and former Goldman Sachs executive Robert Mnuchin, who just spent $91 million of a client's money on a stainless steel statuette of a rabbit.

On that side, billionaire private equity investor Robert F. Smith, who just announced to the graduating class of nearly 400 at the historically black Morehouse College that he would cover their student debt, at a cost of an estimated $40 million.

If you're counting, the buyer of the Jeff Koons artwork could have made two gestures equivalent to Smith's, and had $11 million left over.

We reported on the art purchase last week. To recap, Mnuchin placed the winning bid of $91.1 million at a Christie's auction May 15 for the statuette crafted by Koons, an artist known for his appeal to a market driven by plutocratic philistines with, arguably, more money than taste. News of the action by Smith, who has been identified by Forbes as the nation's richest African American ($4.4 billion in net worth), came over the weekend.

Mnuchin, who is the father of Treasury Secretary Steven T. Mnuchin, has said he didn't buy the Koons statuette for his own collection. He hasn't revealed the buyer, but among the suspects is hedge fund billionaire Steven A. Cohen, an active participant in the high-end art market, who also isn't talking. The seller was the estate of the late billionaire media mogul S.I. Newhouse.

Our suggestion that the May 15 auction -- indeed, the multi-billion-dollar art market generally -- justified proposals for putting a leash on big fortunes, such as Sen. Elizabeth Warren's idea for a wealth tax, produced a certain pushback from libertarians grousing about government "confiscation" and infringement of the freedom to waste one's wealth on a whim. Warren, D-Mass., calls for a tax of 2% on net worth above $50 million and an additional 1% on net worth above $1 billion, which doesn't sound like much of a confiscatory burden. She also calls for enhancing government support for historically black colleges, such as Morehouse.


But the contrasting investments represented by the Smith and Mnuchin purchases also point to some issues about billionaire philanthropy that warrant scrutiny.

It's proper to acknowledge that spending millions on art of dubious intrinsic value isn't incompatible with donating to worthy social causes. Cohen is credited with tens of millions of dollars in contributions to health and educational institutions, for example.

Other billionaires have made their mark with notable contributions for improved public access to art and cultural artifacts. Hedge fund promoter Stephen A. Schwartzman announced a $100-million donation to the New York Public Library in 2008, in return for which he got the system's landmark main building on 42nd Street rechristened in his name. Los Angeles billionaire Eli Broad has opened his art collection to public viewing via the Broad museum on Bunker Hill, to which admission is free. The Getty Museum also is free.

No one should begrudge these donors the honor of having their names associated with their largess. But no one should forget that some of their contribution is billed to the general public, via the tax deduction they receive for philanthropic donations. Unlike the federal income tax deductions for state and local taxes, charitable deductions weren't capped by the tax cut enacted by Republicans in December 2017, most of which went into the pockets of the 1%.


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