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I posted this on a different thread. I think it is tax avoidance. One way to look at this is that Zuckerberg just robbed the treasury of $45B. Part of that wo
by luckydude 11y ago
I posted this on a different thread. I think it is tax avoidance.
One way to look at this is that Zuckerberg just robbed the treasury of $45B. Part of that would have come in through capital gains taxes and the rest through the estate tax.
What they do with that money is up to them, not the state. It's a pretty sweeping end run around the taxation system.
Maybe we'll get lucky and he'll use the money to good end like Gates is doing. And maybe not.
This is a heck of a tax code we've got, it's trickle down on a grand scale.
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- erikpukinskis 11y agoI don't understand. This is how the tax code works. If you give the money away to charity the Government doesn't take income tax on it. That is a law that was passed. The whole point is to get people to give money to charities because that's a good thing.
- mystikal 11y agoThe point is that you can justify lower taxes if you have private donations to charities instead of state funding.
- sombremesa 11y agoThe article linked suggests that they are not giving any money away.
- secstate 11y agoEh, but you're assuming that money to charities is always a good thing. There are a) some pretty terrible charities out there and b) some patently fake charities that are designed as money laundering schemes. The tax code works because it was written by people who had huge amounts of wealth and were pissed that the federal government (the People of the U.S.) created an income tax. No other developed country has such crazy laws regarding charity donations as the U.S.
- lifeformed 11y agoSo why is everyone already assuming Mark's charity is going to be one of the terrible ones? I don't see why he wouldn't give an honest shot at improving the world, as a young idealist. Maybe he won't do a great job at it, but people should reserve judgement til then.
- zeofig 11y agoI'd say you're making the assumption that it will be used for good, when so many charities are indeed used for tax evasion (and other more nefarious purposes). When you condition these probabilities on how most charities actually operate, and on Zuckerberg's past behaviour, a high level of cynicism proves to be the rational position.
- deleted 11y ago[deleted]
- ekianjo 11y agoMark hasn't been improving the Internet so far (actually FB made it worse in numerous ways), so why do you think he has any incentive to improve the world as a whole ?
- justinclift 11y agoFacebook is abusive of people's personal privacy, even though it is generally an effective tool for improving people's (layperson's?) communication. So, it's probably a better idea to approach it with a cynical perspective instead of an optimistic (naive?) one. It could turn out to not be estate-tax evasion... however it seems unlikely.
- deleted 11y ago[deleted]
- ekianjo 11y ago> No other developed country has such crazy laws regarding charity donations as the U.S. Wrong. France has the "Association Loi 1901" law and it's pretty much the same thing, a money laundering scheme for most of the organizations benefiting from it - most of the time politicians using public money to finance such organizations where they put their friends and families in charge. This kind of things has no borders.
- roywiggins 11y agoIt's been argued that it gives a few incredibly wealthy people undue influence on public spending. Instead of being taxed and then spent according to the government's priorities, which is at some level accountable to the public, a few wealthy people get to decide what programs have merit and pour their money into them.
- mullingitover 11y agoEh, the United States spends a lot of that tax money on the military. I don't have a problem with wealthy people making their own call on the guns vs. butter question.
- mystikal 11y ago> I don't have a problem with wealthy people making their own call on the guns vs. butter question. You can donate to military organizations that fund warfare directly?
- interesting_att 11y agoExactly. Would you trust Mark Zuckerberg with spending 15bn for the supposed betterment of society, or would you trust the US government? Given that the US government wastes so much via corrupt deals, inefficiencies, insane surveillance, and absurd military spending- I would favor Zuckerberg directing the fund.
- burkemw3 11y ago"A lot" is relative. Wikipedia says the military is 17% of expenditures: https://en.wikipedia.org/wiki/Expenditures_in_the_United_States_federal_budget https://en.wikipedia.org/wiki/Expenditures_in_the_United_Sta... This may or may not constitute a lot, depending on who you are.
- mullingitover 11y agoIf we're going to talk about relative military spending... https://en.wikipedia.org/wiki/List_of_countries_by_military_expenditures https://en.wikipedia.org/wiki/List_of_countries_by_military_...
- vilhelm_s 11y agoThis is not a charity in the tax sense (a 501(c) organization), it's a limited liability company. So if there are tax benefits, I don't think they come from a government policy to increase charitable spending.
- 542458 11y agoI don't understand this comment - You don't have to be a charity to do charitable works, and an LLC can be a charity. Note that the Bill & Melinda Gates Foundation is a Foundation (which is not all that different from an LLC without shareholders from a tax+reporting perspective), and does lots of charitable works.
- prostoalex 11y agoThe tax treatment of a charitable foundation (as opposed to an LLC) is very different.
- InclinedPlane 11y agoNot a charity, it's an LLC investment vehicle.
- notacoward 11y agoBut is it really charity? Unfortunately, the charity exemption is given to many things that aren't very charitable at all, including some that are materially and intentionally bad for society (i.e. many that engage in overtly religious and/or political behavior). I'm willing to give Zuck the benefit of the doubt for being sincere and meaning well, but only time will tell if this is true charity.
- hsitz 11y agoMost charitable gifts are a form of tax avoidance (and _all_ of them potentially are if a person's income is such that it makes sense to take advantage of itemized deductions). People get receipts for charitable contributions precisely so they can deduct those amounts from their taxable income. Zuckerberg's plan is of much larger scale, but the fact is that the tax code is set up to encourage charitable contributions by making them non-taxable. The tax code is set up this way, quite understandably, to encourage individuals to make charitable gifts, by creating an extra "bang-for-your-buck" for people who choose to make them. The linked article seems to suggest that Zuckerberg is trying to take advantage of the system by gaining tax-exempt status while effectively _not_ making charitable gifts, that he is somehow trying to pass everything to the child while taking advantage of tax-exempt status of a charitable organization. I'm skeptical both that his intent is to try to do this, and that there is any scheme that could legally accomplish this. On a different, but related, note, if I were a parent with $40Bn (or $30Bn, $20Bn, $10Bn, or even $1Bn) I would certainly avoid any plan where the bulk of my estate was to be left to my child. Having that much money is a big responsibility, and it's not something that's likely to add to a person's quality of life. Quite the contrary, it's likely a hindrance, not something I would want to saddle my child with. At most, leave them some large amount ($5M, $10M, $20M, $50M?), something basically guaranteed to make them a wealthy person who doesn't need to worry about money, but hopefully not enough to require that responsible management of their fortune be a main focus of their life. (I realize there are moral implications of having that much money for anyone who has even $10M -- perhaps even $1M -- but when the amounts get astronomical, say to hundreds of millions or more, the moral responsibility really does -- or should -- become almost overwhelming. Not a burden I'd want to put on my child.)
- dizzyviolet 11y agoI've never understood that about deducting charitable donations. I've always had the principle that I shouldn't be getting anything for my charity. Otherwise, it wouldn't really be a donation to me. It would be make it conditional. I'm giving this money away, but give me some back from the taxpayers? I might sound like a sucker, but that's just always been my thought on it. My mother once said something to me like that as a kid and I've applied it donating.
- eveningcoffee 11y agoWell, it is proportionally less money for the things that are funded the most by the government.
- ganeumann 11y agoThis, obviously, does not make sense. The entire $45billion would not have been given over to taxes.
- mattzito 11y agoIt's an LLC, isn't it? That means that the LLC will pay capital gains tax when the stock is sold. The government gets its money either way. The estate planning part is more complex, I'm not qualified to answer that, but even in that article the linked option basically talks about how you can get a 40% discount on the value, but the estate tax basically kicks in regardless once you transfer LLC shares to your kids. So it's not quite as cut-and-dried as saying, "Zuckerberg just robbed the treasury of $45b"
- mikeryan 11y agoNo the loopholes is that if the LLC donates the appreciated shares to charity it will get a deduction of the fair market value. However if a tax-exempt entity (Charity) then sells the stock it does not pay capital gains.
- csmajorfive 11y agoThe same is true if he donates the shares directly without going through an LLC.
- mikeryan 11y agoBut then the money doesn't get the protections and shelter as part of the LLC which may very well likely invest as a for-profit entity. In other words there are other reasons to create the LLC that aren't about avoiding taxes. And my point still stands this way there is no capital gains paid [edit] on shares donated to charities. Yes there may be taxes paid on shares donated to for-profit entities or liquidated by the LLC. There's multiple scenarios here my capital gains comments only refers to donations of shares directly to a non-taxable entity.
- deleted 11y ago[deleted]
- cdcarter 11y agoIf any of the shares the LLC holds are donated to a public charity, there will be no tax implications for the LLC, as if Z donated the shares directly or operated a private foundation, and without any of the freedoms of the LLC. If any of the shares the LLC holds are liquidated by the LLC or granted to for-profits, situations where the "other reasons to create the LLC" are in effect, capital gains tax WILL be owed. The LLC is as if he held the shares personally, when it comes to capital gains. The estate situation is very different, not cut and dry, and that's what is being discussed in this article.
- deleted 11y ago[deleted]
- deleted 11y ago[deleted]
- mikeryan 11y agoThere's a better article here: http://www.nytimes.com/2015/12/04/business/dealbook/how-mark-zuckerbergs-altruism-helps-himself.html http://www.nytimes.com/2015/12/04/business/dealbook/how-mark...
- csmajorfive 11y agoThey do not avoid capital gains taxes by doing this. Also, more broadly, when you see a "sweeping end run around the taxation system", it may be instructive to consider why everyone else doesn't just do the same. Legal tax avoidance techniques are not secrets.
- deleted 11y ago[deleted]
- logn 11y ago> why everyone else doesn't just do the same When your upside on doing fancy tax maneuvers is several billion, you can afford IRS lawsuits. And you can afford the initial time for a lawyer to set this all up. Average people are using Turbo Tax for yearly taxes and relying on common law to handle their estate, because that's all they can afford.
- dools 11y agoYou can't rob the treasury of USD ... The US government creates USD when it spends.
- duncan_bayne 11y ago"What they do with that money is up to them, not the state. " That's how property works, you know. Hopefully this represents a step away from compulsory taxation as a society.
- zizee 11y agoHow the heck would a modern society function without some sort of compulsory taxation?
- duncan_bayne 11y agoThere are a lot of questions wrapped up in yours :) Briefly: if you pare Government back to core functions, you don't need much money. In New Zealand, we (meaning the Libertarianz) estimated it at around $2,500 / working adult / year. That (back at the turn of the 21st century) would get you courts, police, Parliament, defense, embassies and the glue to run it all. Then you need a way of raising the money. Probably, most working people can afford $2,500 per year to keep civilisation running, especially if they're not paying any other taxes. Maybe a poll tax? Seems reasonable that those paying also do the voting. Could simply solicit donations, or maybe run a lottery. But no: you couldn't run a socialist country that way. Which is sort of the point :)
- tolmasky 11y agoWell as long as he doesn't use half of it to start a bunch of wars in the middle east, we'll probably end up ahead of what would have happened if it would have gone to taxes. As you said, if Gates' leadership is followed, I think we'll end up wayyyy ahead of what would happen if it goes to taxes (especially if you consider that ironically enough many of the people that actually need the help might get it - like poor in other countries benefiting from malaria cures, vs whatever domestic interests would do with the money here)
- joshmn 11y ago"The only solution to the current tax system is to make more rules, so it's more convoluted than ever." — every politician. No, what we need is to trim down the fat that your liberal arts degree decide to fluff in there for the sake of your ego.