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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
by 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?