Tuesday, October 4, 2011

Starbucks gets it backward

By Donald Sensing

Starbucks to Begin Collecting Donations to Stimulate U.S. Job Growth

What's wrong with this picture?

Starting Nov. 1, Starbucks will begin collecting donations of $5 or more from customers to stimulate U.S. job growth through its “Jobs for USA” program. The Seattle-based coffee chain is collaborating with the Opportunity Finance Network, a nonprofit that works with nearly 200 community development financial institutions to provide loans to small businesses and community groups. Starbucks says 100 percent of the donations will go toward loans for firms and organizations that can add jobs or stem job losses.
This is completely backwards. If Starbucks wants to "stimulate the economy," it can start by lowering its darn prices. Leaving money in customers' pockets will enable them to spend the savings in other businesses rather than have a donation sucked into a bureaucratic mixing machine where each handling step causes loss of impact.

This is another liberal example of thinking that central control can pick winners and losers in the economy. Well, that worked out so well for us with Solyndra, didn't it? Unlike the government, Starbucks cannot compel a customer to support its program, but like the government, Starbucks thinks it can choose better than us on how to spend that $5.

Now, to be evenhanded, Starbucks is also hiring across the company and should be commended for that. And again, donations are voluntary so anyone who thinks that Starbucks can't spend that $5 more wisely than s/he can may simply withhold it.

But some questions for Sbux:

1. Does the corporation get a tax deduction of all or part of the amount it collects and then disburses? I am guessing yes. So are the donations by customers also going to be deductible? For just as Warren Buffett could pay more income tax if he really wanted to, customers can surely donate $5, $50, $500 or $5,000 each if they want.

2. How transparent will Sbux be in revealing who gets the loans, for what amounts and for what business purpose?

On the one hand, Sbux should be commended at some level for taking a private initiative to do something. On the other, I'd be more commending if it dropped the requested donation to, say, $4 and reduced its prices by one-fifth.

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