4 ms·

I enjoy backseat driving as much as the next person. It's fun to tell someone with money that they should spend it on X and not Y. But it's probably not product

I enjoy backseat driving as much as the next person. It's fun to tell someone with money that they should spend it on X and not Y. But it's probably not productive, though it does lead to lots of clicks and outrage. Would it be more productive to simply promote specific unmet needs in the Valley?

protomyth 8y ago
The problem really isn't what they do with their money (it is their money), but when they get a charitable tax break without doing any charity, it does get somewhat annoying.
pmoriarty 8y ago
The outrage isn't over what these people do with their money, but over a tax loophole that allows rich people to get tax breaks for effectively doing nothing. As for promoting specific unmet needs in the Valley, there's no shortage of that, but apparently the rich would prefer to get big tax breaks than actually meeting those needs.
- TAForObvReasons 8y ago
  It's really amusing to see people who were outraged when the Trump Foundation was taking advantage of tax law turn around and suddenly find it acceptable when Silicon Valley does the same. For the record, neither are acceptable -- the actions described are a clear perversion of the intention of charity.
  - icebraining 8y ago
    What advantage of tax law did the Trump Foundation take? The reports I'm seeing[1] say they broke tax law, which isn't really the same [1] https://www.ft.com/content/28c71c58-b0df-11e6-a37c-f4a01f1b0fa1 https://www.ft.com/content/28c71c58-b0df-11e6-a37c-f4a01f1b0...
- icebraining 8y ago
  It's not "doing nothing". It's legally pledging the money for use on charitable purposes, rather than buying mansions or yachts. And they only get a tax break on that money.
  - pmoriarty 8y ago
    That pledge is worthless if that money never actually gets spent, which is apparently just what's happening with a lot of these "charities". In those cases the pledges help no one except rich donors, who get tax breaks.
    - icebraining 8y ago
      Even if the money is never spent, those rich donors are still worse off than if they had kept the money. So I have to wonder what you think is their goal.
      - Retric 8y ago
        I am not convinced that's always true. They are double dipping on tax breaks. If you invest 1$ and it's worth 1,001$ you would normally pay taxes on that of 15% federal + state. However, if you 'donate' it you get to take a deduction on other incomes for the full 1,001$ and those incomes could be taxed at 39.6% federal + state. So it costs you 850$ - state taxes to save 397$ + state taxes. California is 13.3% so I am not 100% but I think that works to spending 717 to save 530$ net cost 187$. So, the question is can you make back more than 187$ from a 1,001$ donation. Our president for example would host charitable events at his golf courses which could likely cross that threshold. But, political donations seem like a good option also work, even just employing family is a classic. PS: If the numbers are a little different aka you are taxed at 39.9% not 15%, then it's a clear net gain. Other possibility is something which is nominally worth X, but you would have trouble liquidating for the full value.
        deleted 8y ago
        [deleted]
- cheald 8y ago
  This is a misguided line of thought - you don't contribute to a DAF in order to preserve your wealth. Said rich person would be richer if they kept the money and paid taxes on it than if they just didn't give it away. There is no legal strategy in which a rich person ends up with more by parking money in a DAF than by just not giving anything to charity in the first place. Once you've put the money in a DAF, it legally doesn't belong to you anymore, and you can't recapture it. For the purposes of purchasing power, you've lost 100% of that money rather than $marginal_rate% of it. If you aren't going to actually execute a gift to charity through the DAF, just paying taxes and keeping the money is the more rational play.
  - pmoriarty 8y ago
    Do these people deserve tax breaks for spending money in a way that doesn't actually get used to help people? That's the core question.
    - cheald 8y ago
      Yes, according to our tax code, they deserve to not pay taxes on money that they give to a 501(c)(3) rather than spending on consumption or investment to enrich themselves with. To withhold the tax benefits on money no longer owned by the taxpayer until a secondary party has disposed of those gifts in a manner that meets some arbitrary criteria of "having helped people" is impractical to impossible. If you give money directly to a charity, but that money sits in the charity's bank account, should you pay taxes on the gift until the charity has demonstrated that they spent your dollars to provide medicine to a poor child? What if they spend those dollars repainting their offices - should you pay taxes on those dollars that you contributed which they didn't spend on helping people? When money is contributed to a DAF, one of two things happens with it: it remains in the stewardship of the DAF, or it is disbursed to an eligible charitable organization. The contributor can't change their mind and take that money back later; the money is committed to charitable organizations, either now or at some indeterminate point in the future. The point of ownership change of that money is the most reasonable and enforceable point to consider the change in taxability of those dollars. You contend that this money "doesn't actually get used to help people", and that's true today, but it's not particularly useful to say that's true of that money in perpetuity; the only "out" for those funds is charitable disbursal or attrition to management fees. The lack of distribution now should not be confused for a lack of distribution ever. Framing DAF contributions as a means for the rich to protect their wealth by dodging taxes is bad math at best. What incentive do you think there is for a wealthy person to contribute to a DAF rather than to a charity directly? What do they gain from doing so?

protomyth 8y ago

The problem really isn't what they do with their money (it is their money), but when they get a charitable tax break without doing any charity, it does get somewhat annoying.

pmoriarty 8y ago

The outrage isn't over what these people do with their money, but over a tax loophole that allows rich people to get tax breaks for effectively doing nothing. As for promoting specific unmet needs in the Valley, there's no shortage of that, but apparently the rich would prefer to get big tax breaks than actually meeting those needs.

TAForObvReasons 8y ago
It's really amusing to see people who were outraged when the Trump Foundation was taking advantage of tax law turn around and suddenly find it acceptable when Silicon Valley does the same. For the record, neither are acceptable -- the actions described are a clear perversion of the intention of charity.
- icebraining 8y ago
  What advantage of tax law did the Trump Foundation take? The reports I'm seeing[1] say they broke tax law, which isn't really the same [1] https://www.ft.com/content/28c71c58-b0df-11e6-a37c-f4a01f1b0fa1 https://www.ft.com/content/28c71c58-b0df-11e6-a37c-f4a01f1b0...
icebraining 8y ago
It's not "doing nothing". It's legally pledging the money for use on charitable purposes, rather than buying mansions or yachts. And they only get a tax break on that money.
- pmoriarty 8y ago
  That pledge is worthless if that money never actually gets spent, which is apparently just what's happening with a lot of these "charities". In those cases the pledges help no one except rich donors, who get tax breaks.
  - icebraining 8y ago
    Even if the money is never spent, those rich donors are still worse off than if they had kept the money. So I have to wonder what you think is their goal.
    - Retric 8y ago
      I am not convinced that's always true. They are double dipping on tax breaks. If you invest 1$ and it's worth 1,001$ you would normally pay taxes on that of 15% federal + state. However, if you 'donate' it you get to take a deduction on other incomes for the full 1,001$ and those incomes could be taxed at 39.6% federal + state. So it costs you 850$ - state taxes to save 397$ + state taxes. California is 13.3% so I am not 100% but I think that works to spending 717 to save 530$ net cost 187$. So, the question is can you make back more than 187$ from a 1,001$ donation. Our president for example would host charitable events at his golf courses which could likely cross that threshold. But, political donations seem like a good option also work, even just employing family is a classic. PS: If the numbers are a little different aka you are taxed at 39.9% not 15%, then it's a clear net gain. Other possibility is something which is nominally worth X, but you would have trouble liquidating for the full value.
      - deleted 8y ago
        [deleted]
cheald 8y ago
This is a misguided line of thought - you don't contribute to a DAF in order to preserve your wealth. Said rich person would be richer if they kept the money and paid taxes on it than if they just didn't give it away. There is no legal strategy in which a rich person ends up with more by parking money in a DAF than by just not giving anything to charity in the first place. Once you've put the money in a DAF, it legally doesn't belong to you anymore, and you can't recapture it. For the purposes of purchasing power, you've lost 100% of that money rather than $marginal_rate% of it. If you aren't going to actually execute a gift to charity through the DAF, just paying taxes and keeping the money is the more rational play.
- pmoriarty 8y ago
  Do these people deserve tax breaks for spending money in a way that doesn't actually get used to help people? That's the core question.
  - cheald 8y ago
    Yes, according to our tax code, they deserve to not pay taxes on money that they give to a 501(c)(3) rather than spending on consumption or investment to enrich themselves with. To withhold the tax benefits on money no longer owned by the taxpayer until a secondary party has disposed of those gifts in a manner that meets some arbitrary criteria of "having helped people" is impractical to impossible. If you give money directly to a charity, but that money sits in the charity's bank account, should you pay taxes on the gift until the charity has demonstrated that they spent your dollars to provide medicine to a poor child? What if they spend those dollars repainting their offices - should you pay taxes on those dollars that you contributed which they didn't spend on helping people? When money is contributed to a DAF, one of two things happens with it: it remains in the stewardship of the DAF, or it is disbursed to an eligible charitable organization. The contributor can't change their mind and take that money back later; the money is committed to charitable organizations, either now or at some indeterminate point in the future. The point of ownership change of that money is the most reasonable and enforceable point to consider the change in taxability of those dollars. You contend that this money "doesn't actually get used to help people", and that's true today, but it's not particularly useful to say that's true of that money in perpetuity; the only "out" for those funds is charitable disbursal or attrition to management fees. The lack of distribution now should not be confused for a lack of distribution ever. Framing DAF contributions as a means for the rich to protect their wealth by dodging taxes is bad math at best. What incentive do you think there is for a wealthy person to contribute to a DAF rather than to a charity directly? What do they gain from doing so?