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That may be so, but don't we want a company like newman's own to exist and do good in the world? Maybe they shouldn't exist under the current tax regime, but it

That may be so, but don't we want a company like newman's own to exist and do good in the world? Maybe they shouldn't exist under the current tax regime, but it's not the company that's in the wrong but rather the system that it operates under.

adventured 9y ago
Please explain, if you would, why you think a charity should be able to own majority positions in for profit operating businesses and shield the profits from that private business behind a charity-based tax approach. That can enable, among other things, vast abuses by companies that set up charities just to act as a front for private businesses to shield profits from high tax brackets. The charity still has to distribute a certain modest percentage of their assets per year, and that pales in comparison to paying 30% or more in taxes. So you set up Burger Charity (or call it McDonald's Charity), which owns BurgerStand USA (operating restaurants). BurgerStand generates profit and kicks it back to Burger Charity almost entirely tax free. Burger Charity uses the tax free proceeds to accumulate vast amounts of real estate, which it then leases to BurgerStand (at an artificially cheap rate made possible by the low tax structure, providing a competitive advantage) for restaurant locations. Then they can do the same for equipment in the restaurants as well (Burger Charity owns the equipment and leases it to BurgerStand at an artificially low rate). Perhaps you set up Burger Equipment Corp that you own, and Burger Land Holdings Corp that you own, they all work with BurgerStand USA (the profits of which all kick back to Burger Charity mostly tax free). Cycle and repeat for an astounding tax avoidance scheme that provides a blatantly unfair advantage to an entity willing to abuse the charity approach.
- StanislavPetrov 9y ago
  >That can enable, among other things.. You're entirely missing the point. The point is that our tax laws should be written in a way to enable an entity like Newman's Own to operate without enabling the many abuses you describe.
  - Ntrails 9y ago
    > The point is that our tax laws should be written in a way to enable an entity like Newman's Own to operate without enabling the many abuses you describe. People have this naive view that tax law is insanely complex and full of loopholes for fun and/or profit. It isn't. It's largely because well intentioned people tried to do a "right thing" for some specific circumstance and unintended consequences made the outcomes wrong. So you plug two holes when there's an outcry but 2 months later some other politician has a great idea and accidentally makes three new ones.
  - Shivetya 9y ago
    our tax laws should be written in the simplest form possible with the least amount of exceptions so that people or corporations don't violate rules by what at times appears to be random chance nor be so complicated that spending millions looking for a specific set of rules is a viable pursuit. personally outside of individual and religious groups I don't see why others should be excused from taxation for being charitable. businesses get name recognition for their activities and it should be part of being a good corporate entity instead of a payoff
    - lotsofpulp 9y ago
      No one should be exempt from taxation, period.
      - JoeAltmaier 9y ago
        Meaningless. Taxes are a complex system with no foundation other than "collect the most feathers with the least squawking". There's no moral basis to who pays how much.
    - pc86 9y ago
      [removed]
      - smt88 9y ago
        So if a for-profit mercenary firm finds it most profitable to violate international law, sell heroin, and torture civilians, you're saying that's a good corporate entity? Lunacy of Friedmanism aside, most corporations maximize value to shareholders by being pro-social.
- imgabe 9y ago
  In order to be a charity, doesn't the charity have to demonstrate that a large majority of their donations were used for charitable purposes? I don't see how "buying real estate and leasing it" would fall into that.
  - notyourday 9y ago
    Foundations are quite funny, actually. They are required every year to distribute a certain percentage of their assets to charities. The percentage is very small - i think it is about 5%.
    - auntienomen 9y ago
      5% isn't small! A charity is typically funded by the returns from investing some pot of money. The stock market returns on average about 7% a year, and inflation is typically about 2%. 7-2=5. At 5%, the charity is required to spend on average all inflation adjusted money its endowment provides.
      - notyourday 9y ago
        5% is an extremely small percentage. Foundations are not supposed to operate perpetually. That's the difference between them and charities.
    - bluGill 9y ago
      It is generally considered that a foundation that distributes more than 7% will lose all their money in just a few years, while foundations that distribute less than that amount will exist "forever". You can calculate the exact amount, based on various market rates of returns. That said, if you are in the situation of setting up a foundation (unlikely, you have to be rich) you should probably force it to spend down to zero in ~20 years. That way you can the best assurance that the foundation doesn't change focus to something you would oppose.
      - notyourday 9y ago
- amigoingtodie 9y ago
  Universities in the US do this with real estate, without the need for a seperate legal entity AND pay no property taxes.
- kw71 9y ago
  Bosch is a charity. It makes a lot of money. Check them out and see where it goes.
  - gangstead 9y ago
    I believe Ikea has a similar set up as well.
- lobster_johnson 9y ago
  Could you start a company whose bylaws stipulate that a certain percentage of the profits has to go to charity, with no ability to ever change that rule? If so, you could set up two companies. One is the charity, the other is the for-profit. The for-profit has to give much of their profits away, but they're still allowed to be as capitalistic as they want to be, and the charity doesn't need to own them. On the other hand, I don't know if such an arrangement could ever be legally binding.
Retric 9y ago
Paying taxes does not equal not exist. Yes, private organizations can provide positive outcomes, but so do taxes so the option to just keep going and pay remains.
- a3n 9y ago
  This is not regular "paying your fair share" taxes, it's intentionally punitive at 200%. Would you exist economically if your tax bill was 200%?
  - Retric 9y ago
    I am not a company. As companies pay taxes on their profit after expenses a 40% or 80% tax rate only reduces but does not eliminate their profits. That said, they will probably be significantly better off to sell the company, but it's simply not required.

adventured 9y ago

Please explain, if you would, why you think a charity should be able to own majority positions in for profit operating businesses and shield the profits from that private business behind a charity-based tax approach. That can enable, among other things, vast abuses by companies that set up charities just to act as a front for private businesses to shield profits from high tax brackets. The charity still has to distribute a certain modest percentage of their assets per year, and that pales in comparison to paying 30% or more in taxes. So you set up Burger Charity (or call it McDonald's Charity), which owns BurgerStand USA (operating restaurants). BurgerStand generates profit and kicks it back to Burger Charity almost entirely tax free. Burger Charity uses the tax free proceeds to accumulate vast amounts of real estate, which it then leases to BurgerStand (at an artificially cheap rate made possible by the low tax structure, providing a competitive advantage) for restaurant locations. Then they can do the same for equipment in the restaurants as well (Burger Charity owns the equipment and leases it to BurgerStand at an artificially low rate). Perhaps you set up Burger Equipment Corp that you own, and Burger Land Holdings Corp that you own, they all work with BurgerStand USA (the profits of which all kick back to Burger Charity mostly tax free). Cycle and repeat for an astounding tax avoidance scheme that provides a blatantly unfair advantage to an entity willing to abuse the charity approach.

StanislavPetrov 9y ago
>That can enable, among other things.. You're entirely missing the point. The point is that our tax laws should be written in a way to enable an entity like Newman's Own to operate without enabling the many abuses you describe.
- Ntrails 9y ago
  > The point is that our tax laws should be written in a way to enable an entity like Newman's Own to operate without enabling the many abuses you describe. People have this naive view that tax law is insanely complex and full of loopholes for fun and/or profit. It isn't. It's largely because well intentioned people tried to do a "right thing" for some specific circumstance and unintended consequences made the outcomes wrong. So you plug two holes when there's an outcry but 2 months later some other politician has a great idea and accidentally makes three new ones.
- Shivetya 9y ago
  our tax laws should be written in the simplest form possible with the least amount of exceptions so that people or corporations don't violate rules by what at times appears to be random chance nor be so complicated that spending millions looking for a specific set of rules is a viable pursuit. personally outside of individual and religious groups I don't see why others should be excused from taxation for being charitable. businesses get name recognition for their activities and it should be part of being a good corporate entity instead of a payoff
  - lotsofpulp 9y ago
    No one should be exempt from taxation, period.
    - JoeAltmaier 9y ago
      Meaningless. Taxes are a complex system with no foundation other than "collect the most feathers with the least squawking". There's no moral basis to who pays how much.
  - pc86 9y ago
    [removed]
    - smt88 9y ago
      So if a for-profit mercenary firm finds it most profitable to violate international law, sell heroin, and torture civilians, you're saying that's a good corporate entity? Lunacy of Friedmanism aside, most corporations maximize value to shareholders by being pro-social.
imgabe 9y ago
In order to be a charity, doesn't the charity have to demonstrate that a large majority of their donations were used for charitable purposes? I don't see how "buying real estate and leasing it" would fall into that.
- notyourday 9y ago
  Foundations are quite funny, actually. They are required every year to distribute a certain percentage of their assets to charities. The percentage is very small - i think it is about 5%.
  - auntienomen 9y ago
    5% isn't small! A charity is typically funded by the returns from investing some pot of money. The stock market returns on average about 7% a year, and inflation is typically about 2%. 7-2=5. At 5%, the charity is required to spend on average all inflation adjusted money its endowment provides.
    - notyourday 9y ago
      5% is an extremely small percentage. Foundations are not supposed to operate perpetually. That's the difference between them and charities.
  - bluGill 9y ago
    It is generally considered that a foundation that distributes more than 7% will lose all their money in just a few years, while foundations that distribute less than that amount will exist "forever". You can calculate the exact amount, based on various market rates of returns. That said, if you are in the situation of setting up a foundation (unlikely, you have to be rich) you should probably force it to spend down to zero in ~20 years. That way you can the best assurance that the foundation doesn't change focus to something you would oppose.
    - notyourday 9y ago
amigoingtodie 9y ago
Universities in the US do this with real estate, without the need for a seperate legal entity AND pay no property taxes.
kw71 9y ago
Bosch is a charity. It makes a lot of money. Check them out and see where it goes.
- gangstead 9y ago
  I believe Ikea has a similar set up as well.
lobster_johnson 9y ago
Could you start a company whose bylaws stipulate that a certain percentage of the profits has to go to charity, with no ability to ever change that rule? If so, you could set up two companies. One is the charity, the other is the for-profit. The for-profit has to give much of their profits away, but they're still allowed to be as capitalistic as they want to be, and the charity doesn't need to own them. On the other hand, I don't know if such an arrangement could ever be legally binding.

Retric 9y ago

Paying taxes does not equal not exist. Yes, private organizations can provide positive outcomes, but so do taxes so the option to just keep going and pay remains.

a3n 9y ago
This is not regular "paying your fair share" taxes, it's intentionally punitive at 200%. Would you exist economically if your tax bill was 200%?
- Retric 9y ago
  I am not a company. As companies pay taxes on their profit after expenses a 40% or 80% tax rate only reduces but does not eliminate their profits. That said, they will probably be significantly better off to sell the company, but it's simply not required.