On charitable foundations

We read all the time about the "cost" in lost tax revenue of such things as the mortgage interest deduction, the tax-deferred status of private retirement plans, and any proposed increase in the amount exempt from federal transfer taxes. I wonder why the subject of charitable foundations doesn't come up during these discussions. Foundations manage hundreds of billions of dollars entirely outside the federal tax system, not to mention the revenue cost of the charitable deductions associated with their creation.

The Becker-Posner blog ruminates on the phenomenon of charitable foundations here. They comment on the long-observed phenomenon that foundations are created by conservatives, but later run by liberals. Says Posner:

A deeper puzzle relates to the leftward drift in foundation policies that Becker discusses, a drift enabled by the perpetual character of a foundation. (I agree that foundation staff work is attractive to liberals and that the children of the founders tend to be more liberal than their fathers. In both cases the main reason is probably that while the creators of the major foundations invariably are successful businessmen, and business values are conservative, foundation staff are not businesspeople and many children of wealthy businesspeople do not go into business either.) The puzzle is why conservatives establish perpetual foundations. Don't they realize what is likely to happen down the road? The answer may be that the desire to perpetuate their name is greater than their desire to support conservative causes.

Both men approve the current tax preferences bestowed upon charitable foundations is justifiable, though they don't comment on the magnitude of the cost.