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>It still seems like a necessary reform however... Why? (Serious question. As a matter of full disclosure, I've read 'Dark Money'. To my mind, DAF's don't seem

>It still seems like a necessary reform however... Why? (Serious question. As a matter of full disclosure, I've read 'Dark Money'. To my mind, DAF's don't seem any more evil than any of the other much larger pools of concentrated wealth out there. eg-corporate lobbying money. In fact, the rules seem to make DAF's a good deal less evil.)

Eridrus 8y ago
https://qz.com/1092737/us-tax-reformers-should-get-rid-of-the-charitable-deduction-too-bad-they-wont/ https://qz.com/1092737/us-tax-reformers-should-get-rid-of-th...
- bilbo0s 8y ago
  This link concerns the overall idea of a charitable deduction, it's not really about the funds. My question was, "Why do DAFs need to be reformed?" Even if you got rid of the charitable deduction, you would still have things like DAFs and Foundations. Think of it this way, WRA came into being in 1917. But if you take, say, the Carnegie Foundation, that's been around since 1905 at minimum. So even without a charitable deduction, these foundations and DAFs would exist. So the question is, why do they need to be reformed? (Or, more precisely, why do DAFs need to be reformed?) You linked to an article explaining why you believe WRA to have been a bad idea. (Or maybe why you believe that WRA has become a bad idea? But either way, it's about the reforms introduced by WRA, not specifically about DAFs.)
  - Eridrus 8y ago
    We should get rid of all charitable tax deductions, and then these funds would simply cease to exist, because they only exist to capture these tax deductions while preserving the donors' power. I don't have any beef with the foundations, I have a beef with our tax policy.
    - bilbo0s 8y ago
      >because they only exist to capture these tax deductions while preserving the donors' power... That's just not the case. The reasons that a donor might choose a DAF are legion. Again, I won't go into them all, but let's take an example that is more common than people realize. A donor who has passed on. Sometimes in life, a couple's children need encouragement to be kindly and generous. Let's put it that way. DAFs are part of a somewhat complicated legal framework that can have the effect of actually obliging heirs to share the family's resources. And of course there are a million other reasons that one might be motivated to use a DAF. Point being, DAFs are not solely used as a tax dodge. And the donors are not seeing the benefits from the tax dodge in any case, the vast majority of that benefit is going to the charities and the financial industry. (Heck, many of the donors have even passed on, so of course they don't care about any tax benefit. They made those arrangements for other reasons.)
      - Eridrus 8y ago
        I don't really believe that these other reasons are a major driver, but it also doesn't matter one way or the other, we can get rid of the tax benefits and let people keep the rest if they want. I agree that the benefit is largely not accruing to the people claiming the tax deduction, but it is a subsidy coming out of the public purse that we should get rid of. [EDIT]: Actually, I take that back, once you take into account the fact that the amount people donate is not significantly impacted by the tax situation, it seems clearer that the people getting the deduction are the ones getting the benefit/subsidy.
        zip1234 8y ago
        It's not coming out of the public purse. Those are not the public's funds to begin with. The law was democratically decided to allow charitable donations.
        Eridrus 8y ago
        And we can democratically repeal the tax deductions.
  - somecontext 8y ago
    For the benefit of others, it appears that "WRA" refers to https://en.wikipedia.org/wiki/War_Revenue_Act_of_1917 https://en.wikipedia.org/wiki/War_Revenue_Act_of_1917 This was surprisingly hard to determine, as it appears this is one of very few such references on the internet.
    - bilbo0s 8y ago
      Sorry. My bad. I should have defined what that was for people. WRA of 1917 is what introduced the charitable deduction to the tax code of the United States.
frgtpsswrdlame 8y ago
The biggest are mentioned in the article: 1. No required distribution per year. A DAF has no obligation to actually give its money away in any timely manner. The Bloomberg article actually undersells how close this was to being regulated. Everybody likes this rule though because it allows people to siphon fees off money which should be in a charity. 2. Upfront tax benefit for later charitable benefit. Charitable tax deductions should be linked to actual charitable giving, not promises to do so. DAFs should only give a tax benefit on the disbursements they make to charities, not on a donors disbursement to the DAF. I think this is the least likely fix to happen but also the one that would most directly fix the problem. 3. Capital gains dodging. The article mentions this but this discrepancy with private foundations should be fixed and donations should be deductible at the cost basis level. Think of this as double-dipping.
- bilbo0s 8y ago
  1. Would be a good reform, but the financial industry would never allow this kind of thing. 2. There are a lot of reasons that the tax benefit to the DONOR, is given on disbursement to the DAF. I won't go over all of them, but without getting too technical, imagine that the donor has passed on, or soon will. Should his/her heirs be allowed to take that tax benefit as they donate money in the DAF? I think most people would answer "No" to that question. (Believe it or not, oftentimes more money is left to the DAF or Foundation, than is left to the heirs. You could end up in a situation where heirs pay no tax on the money they're earning from their own portion of the estate). So again, we can argue the propriety of the general idea of the charitable deduction, but there are a lot of very good reasons that if the deduction exists, it should be given to the donor, or his/her estate, on donation to the DAF. 3. I wouldn't have too much of a problem with a cost basis deduction, and neither would any of the donors. But again, two things, the financial services industry and the charity would have a problem with that. And second, yet again, what we're really talking about is the existence of the deduction at all, because +/-5 to 10% is not going to make much of a difference to a donor. (Many of whom have passed on in any case.) So these DAF's would exist with or without cost basis level deductions. The only difference is, charities would end up with a bit less money or a bit more money. (Depending on what you're looking at with the capital gains.)
justicezyx 8y ago
Not more evil then means not need reform?...

Eridrus 8y ago

https://qz.com/1092737/us-tax-reformers-should-get-rid-of-the-charitable-deduction-too-bad-they-wont/ https://qz.com/1092737/us-tax-reformers-should-get-rid-of-th...

bilbo0s 8y ago
This link concerns the overall idea of a charitable deduction, it's not really about the funds. My question was, "Why do DAFs need to be reformed?" Even if you got rid of the charitable deduction, you would still have things like DAFs and Foundations. Think of it this way, WRA came into being in 1917. But if you take, say, the Carnegie Foundation, that's been around since 1905 at minimum. So even without a charitable deduction, these foundations and DAFs would exist. So the question is, why do they need to be reformed? (Or, more precisely, why do DAFs need to be reformed?) You linked to an article explaining why you believe WRA to have been a bad idea. (Or maybe why you believe that WRA has become a bad idea? But either way, it's about the reforms introduced by WRA, not specifically about DAFs.)
- Eridrus 8y ago
  We should get rid of all charitable tax deductions, and then these funds would simply cease to exist, because they only exist to capture these tax deductions while preserving the donors' power. I don't have any beef with the foundations, I have a beef with our tax policy.
  - bilbo0s 8y ago
    >because they only exist to capture these tax deductions while preserving the donors' power... That's just not the case. The reasons that a donor might choose a DAF are legion. Again, I won't go into them all, but let's take an example that is more common than people realize. A donor who has passed on. Sometimes in life, a couple's children need encouragement to be kindly and generous. Let's put it that way. DAFs are part of a somewhat complicated legal framework that can have the effect of actually obliging heirs to share the family's resources. And of course there are a million other reasons that one might be motivated to use a DAF. Point being, DAFs are not solely used as a tax dodge. And the donors are not seeing the benefits from the tax dodge in any case, the vast majority of that benefit is going to the charities and the financial industry. (Heck, many of the donors have even passed on, so of course they don't care about any tax benefit. They made those arrangements for other reasons.)
    - Eridrus 8y ago
      I don't really believe that these other reasons are a major driver, but it also doesn't matter one way or the other, we can get rid of the tax benefits and let people keep the rest if they want. I agree that the benefit is largely not accruing to the people claiming the tax deduction, but it is a subsidy coming out of the public purse that we should get rid of. [EDIT]: Actually, I take that back, once you take into account the fact that the amount people donate is not significantly impacted by the tax situation, it seems clearer that the people getting the deduction are the ones getting the benefit/subsidy.
      - zip1234 8y ago
        It's not coming out of the public purse. Those are not the public's funds to begin with. The law was democratically decided to allow charitable donations.
        Eridrus 8y ago
        And we can democratically repeal the tax deductions.
- somecontext 8y ago
  For the benefit of others, it appears that "WRA" refers to https://en.wikipedia.org/wiki/War_Revenue_Act_of_1917 https://en.wikipedia.org/wiki/War_Revenue_Act_of_1917 This was surprisingly hard to determine, as it appears this is one of very few such references on the internet.
  - bilbo0s 8y ago
    Sorry. My bad. I should have defined what that was for people. WRA of 1917 is what introduced the charitable deduction to the tax code of the United States.

frgtpsswrdlame 8y ago

The biggest are mentioned in the article: 1. No required distribution per year. A DAF has no obligation to actually give its money away in any timely manner. The Bloomberg article actually undersells how close this was to being regulated. Everybody likes this rule though because it allows people to siphon fees off money which should be in a charity. 2. Upfront tax benefit for later charitable benefit. Charitable tax deductions should be linked to actual charitable giving, not promises to do so. DAFs should only give a tax benefit on the disbursements they make to charities, not on a donors disbursement to the DAF. I think this is the least likely fix to happen but also the one that would most directly fix the problem. 3. Capital gains dodging. The article mentions this but this discrepancy with private foundations should be fixed and donations should be deductible at the cost basis level. Think of this as double-dipping.

bilbo0s 8y ago
1. Would be a good reform, but the financial industry would never allow this kind of thing. 2. There are a lot of reasons that the tax benefit to the DONOR, is given on disbursement to the DAF. I won't go over all of them, but without getting too technical, imagine that the donor has passed on, or soon will. Should his/her heirs be allowed to take that tax benefit as they donate money in the DAF? I think most people would answer "No" to that question. (Believe it or not, oftentimes more money is left to the DAF or Foundation, than is left to the heirs. You could end up in a situation where heirs pay no tax on the money they're earning from their own portion of the estate). So again, we can argue the propriety of the general idea of the charitable deduction, but there are a lot of very good reasons that if the deduction exists, it should be given to the donor, or his/her estate, on donation to the DAF. 3. I wouldn't have too much of a problem with a cost basis deduction, and neither would any of the donors. But again, two things, the financial services industry and the charity would have a problem with that. And second, yet again, what we're really talking about is the existence of the deduction at all, because +/-5 to 10% is not going to make much of a difference to a donor. (Many of whom have passed on in any case.) So these DAF's would exist with or without cost basis level deductions. The only difference is, charities would end up with a bit less money or a bit more money. (Depending on what you're looking at with the capital gains.)

justicezyx 8y ago

Not more evil then means not need reform?...