7 ms·

If I donate to a nonprofit, itemize my deductions, and get a tax reduction based on my donation, am I not "evading" taxes? Sure, donations are perfectly legal

If I donate to a nonprofit, itemize my deductions, and get a tax reduction based on my donation, am I not "evading" taxes? Sure, donations are perfectly legal and an above-board way to evade paying taxes to the USA, but it's still tax avoidance and I could choose not to itemize, especially if my donations were 100% pure of heart. Similarly, emigrating to Malta, or Bermuda, etc. is perfectly legal and if I do so for the weather, or to avoid paying taxes, is not one just as legal as the other? Even moving from New York to Texas so my combined state and city income taxes drop from 10% to 0% has a whiff of tax avoidance. Simply put, people vote with their feet, and the rich have the best shoes money can buy.

adventured 8y ago
> If I donate to a nonprofit, itemize my deductions, and get a tax reduction based on my donation, am I not "evading" taxes? No. You're mixing up terms. That's avoiding taxes. There's a critical distinction in the tax world between avoiding taxes and evading taxes. One is legal and common, one can send you to prison and get you a lifetime of close IRS scrutiny. Simplified, evading means to not pay what you actually owe (what you should be paying). Avoiding means to use entirely legal means - such as deductions - to not owe the taxes in the first place. To evade taxes you always have to do something illegal. In avoiding taxes you should never break the law.
- seibelj 8y ago
  Emigrating to lower-tax countries is not illegal. So it's not tax evasion, correct? Anything I do that is legal cannot be tax evasion?
sdoering 8y ago
Well if you donate money it should, in a perfect world, be only tax deductible if it is for an effort society seems of special value so that incentives are implemented to support this. So tax deductible donations show what is important for a society at large. And society profits. Leaving a country to evade taxes doesn't help society at large. People do this after they profit of the infrastructure and all other stuff society provided and paid for with taxes.
- seibelj 8y ago
  But nonprofits encompass a huge variety of organizations, some promoting guns (the National Rifle Association[0]) and others paying for abortions[1]. Wouldn't it be better to force everyone to pay their taxes owed, then if they are truly altruistic, donate whatever extra they want? I really don't see how tax deductions for donations aren't glorified tax evasion strategies. [0] https://www.snopes.com/fact-check/nra-tax-exempt-non-profit/ https://www.snopes.com/fact-check/nra-tax-exempt-non-profit/ [1] https://abortionfunds.org/ https://abortionfunds.org/
sonnyblarney 8y ago
"donate to a nonprofit" is not 'tax evasion' (which is illegal) You could argue it's tax avoidance, but it's not even that, it's just making a donation, and that's how they are taxed. It's part of your normal activity: taxes are higher on some things than others. Creating a non-profit as a special purpose vehicle would be 'tax avoidance' but if it's legal, it's legal. The OP's comments are perfectly just i.e. punishing tax havens because there's deep incentive for them to facilitate actual tax evasion, moreover, they enable the stockpiling of surpluses generated elsewhere. Especially for those part of a 'common market' - you can't have taxes at 1% in Malta and 50% and France, it's not going to work. Dubai does not have any tax deals with the US, it's built on utterly shady tax dealings. Much of the money poured into Afghanistan by the US for reconstruction ends up there, for example. It's super duper dirty. People are not fleeing China because of 'taxation' in the classical sense, they're fleeing for a pile of other, obvious reasons. People are however fleeing France, partly due to 'taxation' and this is an issue ... they have some issues with competitively and their solution of 'just tax the rich' will not work out if that's it. Worth considering: normalize the migration data against 'regular people' and what you'll find is that still a lot of Chinese are moving to Australia/Canada, and in general people are moving there, the US anyhow! I'll bet the one that sticks out a little is France. I don't suggest a ton of people are leaving, net.
- seibelj 8y ago
  > You could argue it's tax avoidance, but it's not even that, it's just making a donation, and that's how they are taxed. It's part of your normal activity: taxes are higher on some things than others. Right, but if it's perfectly legal to emigrate to a lower-tax jurisdiction, is that not "part of normal activity"? I think there's an argument to remove the tax deduction for donations. If you are doing it altruistically, then you still owe your fair share to the government, no?
kartan 8y ago
> Simply put, people vote with their feet, and the rich have the best shoes money can buy. I have been on vacations on Malta. It is a nice place for a vacation, but it is not the most interesting place in the world to live in. Rich people are rich because they have access to luxury items, health care, transportations systems, etc. For all that to exist a complex society is needed where citizens have education, transport, health care, food safety, clean water, rule of law... and all that costs money, a lot of it. If rich people leave that society, how rich are they? How easy is to just tax the business that produces wealth? Malta, as a nice place as it is, cannot produce super-rich people. Is Malta decides to isolate itself it just becomes an inhabitable rock in the middle of the Mediterranean. The same goes for more tax havens. Rich people will vote with their feet, but the economy will not care. Taxes are needed to generate any wealth independently of the tantrum of a few rich people.
- floatingatoll 8y ago
  In a just world, the 100 countries signed on to the information sharing agreement would embargo travel to and from Malta and other countries that support evasion, with passport seizures at the border when their citizens enter with Malta passport stamp pending the outcome of a criminal investigation into their reason for visiting.
  - Zarath 8y ago
    Sounds like a great world!
    - floatingatoll 8y ago
      I hope someday to be befriended by a wealthy person, so that I can better empathize with the trauma that such a policy would inflict on them, but I am poor because I funded someone’s book and have never known anyone rich enough to care about avoiding taxes. Perhaps someday I will have such a friend, but not today. Based on your reaction, I envy you that :(
- kgwgk 8y ago
  > [Malta] it is not the most interesting place in the world to live in. Rich people are rich because they have access to [...] If rich people leave that society, how rich are they? So you want to prevent rich people from moving to low-tax jurisdictions for their own good? How kind of you!
solidsnack9000 8y ago
At a high level, what makes tax evasion wrong is when people are able to benefit from the commons — stable currency, weights and measures, a climate of rule of law and the commensurate security of property — without paying into it. People who have successful businesses and are worth millions of dollars would be robbed and cheated every single day if it were not for the vast array of institutions — expensive institutions — that facilitate the climate of trust and security characteristic of developed countries today.
- seibelj 8y ago
  The majority of us would agree that 100% taxation is unworkable, as in, every single cent of income I earn is seized by the state. Given your comment, I assume you think 0% taxation is also infeasible. So we agree that somewhere above 0% and below 100% taxation there is some optimal amount. However, given the circumstances of the country and our personal philosophies, we may disagree on that optimal level. The fact that free people can move to lower (or higher!) tax jurisdictions, and judge the quality of those services based on how much they pay and what they get in return, is a good thing in my opinion. The competition keeps politicians from elevating taxation to that unworkable 100%.
  - techsupporter 8y ago
    > The fact that free people can move to lower (or higher!) tax jurisdictions, and judge the quality of those services based on how much they pay and what they get in return, is a good thing in my opinion. I think few would disagree that if you move to a new jurisdiction to benefit from a different tax scheme, that's fine. But therein lies two problems: First, so few people are able to move; the wealthy are disproportionally able to have their pick of tax jurisdictions so they can extract benefits from one society and then jump ship when it suits them without returning benefits to that society. Second is when people move on "paper" to benefit from another jurisdiction but don't physically move in reality. Thus they continue to benefit from the society they nominally "left" but don't pay into it. That's the kind of tax avoidance / evasion that most people have a problem with.
rectang 8y ago
The passage I quoted is about evasion, not avoidance. To give a bit more context, the prior sentence speaks of "misuse". > The Organisation for Economic Co-operation & Development is scrutinizing the potential misuse of these schemes. In October 2018, it released a blacklist of 21 jurisdictions, including Malta and Cyprus, that it believes are undermining international efforts to combat tax evasion. What we're talking about here is hiding assets that are subject to taxation. Like Swiss banks did for many years.

adventured 8y ago

> If I donate to a nonprofit, itemize my deductions, and get a tax reduction based on my donation, am I not "evading" taxes? No. You're mixing up terms. That's avoiding taxes. There's a critical distinction in the tax world between avoiding taxes and evading taxes. One is legal and common, one can send you to prison and get you a lifetime of close IRS scrutiny. Simplified, evading means to not pay what you actually owe (what you should be paying). Avoiding means to use entirely legal means - such as deductions - to not owe the taxes in the first place. To evade taxes you always have to do something illegal. In avoiding taxes you should never break the law.

seibelj 8y ago
Emigrating to lower-tax countries is not illegal. So it's not tax evasion, correct? Anything I do that is legal cannot be tax evasion?

sdoering 8y ago

Well if you donate money it should, in a perfect world, be only tax deductible if it is for an effort society seems of special value so that incentives are implemented to support this. So tax deductible donations show what is important for a society at large. And society profits. Leaving a country to evade taxes doesn't help society at large. People do this after they profit of the infrastructure and all other stuff society provided and paid for with taxes.

seibelj 8y ago
But nonprofits encompass a huge variety of organizations, some promoting guns (the National Rifle Association[0]) and others paying for abortions[1]. Wouldn't it be better to force everyone to pay their taxes owed, then if they are truly altruistic, donate whatever extra they want? I really don't see how tax deductions for donations aren't glorified tax evasion strategies. [0] https://www.snopes.com/fact-check/nra-tax-exempt-non-profit/ https://www.snopes.com/fact-check/nra-tax-exempt-non-profit/ [1] https://abortionfunds.org/ https://abortionfunds.org/

sonnyblarney 8y ago

"donate to a nonprofit" is not 'tax evasion' (which is illegal) You could argue it's tax avoidance, but it's not even that, it's just making a donation, and that's how they are taxed. It's part of your normal activity: taxes are higher on some things than others. Creating a non-profit as a special purpose vehicle would be 'tax avoidance' but if it's legal, it's legal. The OP's comments are perfectly just i.e. punishing tax havens because there's deep incentive for them to facilitate actual tax evasion, moreover, they enable the stockpiling of surpluses generated elsewhere. Especially for those part of a 'common market' - you can't have taxes at 1% in Malta and 50% and France, it's not going to work. Dubai does not have any tax deals with the US, it's built on utterly shady tax dealings. Much of the money poured into Afghanistan by the US for reconstruction ends up there, for example. It's super duper dirty. People are not fleeing China because of 'taxation' in the classical sense, they're fleeing for a pile of other, obvious reasons. People are however fleeing France, partly due to 'taxation' and this is an issue ... they have some issues with competitively and their solution of 'just tax the rich' will not work out if that's it. Worth considering: normalize the migration data against 'regular people' and what you'll find is that still a lot of Chinese are moving to Australia/Canada, and in general people are moving there, the US anyhow! I'll bet the one that sticks out a little is France. I don't suggest a ton of people are leaving, net.

seibelj 8y ago
> You could argue it's tax avoidance, but it's not even that, it's just making a donation, and that's how they are taxed. It's part of your normal activity: taxes are higher on some things than others. Right, but if it's perfectly legal to emigrate to a lower-tax jurisdiction, is that not "part of normal activity"? I think there's an argument to remove the tax deduction for donations. If you are doing it altruistically, then you still owe your fair share to the government, no?

kartan 8y ago

> Simply put, people vote with their feet, and the rich have the best shoes money can buy. I have been on vacations on Malta. It is a nice place for a vacation, but it is not the most interesting place in the world to live in. Rich people are rich because they have access to luxury items, health care, transportations systems, etc. For all that to exist a complex society is needed where citizens have education, transport, health care, food safety, clean water, rule of law... and all that costs money, a lot of it. If rich people leave that society, how rich are they? How easy is to just tax the business that produces wealth? Malta, as a nice place as it is, cannot produce super-rich people. Is Malta decides to isolate itself it just becomes an inhabitable rock in the middle of the Mediterranean. The same goes for more tax havens. Rich people will vote with their feet, but the economy will not care. Taxes are needed to generate any wealth independently of the tantrum of a few rich people.

floatingatoll 8y ago
In a just world, the 100 countries signed on to the information sharing agreement would embargo travel to and from Malta and other countries that support evasion, with passport seizures at the border when their citizens enter with Malta passport stamp pending the outcome of a criminal investigation into their reason for visiting.
- Zarath 8y ago
  Sounds like a great world!
  - floatingatoll 8y ago
    I hope someday to be befriended by a wealthy person, so that I can better empathize with the trauma that such a policy would inflict on them, but I am poor because I funded someone’s book and have never known anyone rich enough to care about avoiding taxes. Perhaps someday I will have such a friend, but not today. Based on your reaction, I envy you that :(
kgwgk 8y ago
> [Malta] it is not the most interesting place in the world to live in. Rich people are rich because they have access to [...] If rich people leave that society, how rich are they? So you want to prevent rich people from moving to low-tax jurisdictions for their own good? How kind of you!

solidsnack9000 8y ago

At a high level, what makes tax evasion wrong is when people are able to benefit from the commons — stable currency, weights and measures, a climate of rule of law and the commensurate security of property — without paying into it. People who have successful businesses and are worth millions of dollars would be robbed and cheated every single day if it were not for the vast array of institutions — expensive institutions — that facilitate the climate of trust and security characteristic of developed countries today.

seibelj 8y ago
The majority of us would agree that 100% taxation is unworkable, as in, every single cent of income I earn is seized by the state. Given your comment, I assume you think 0% taxation is also infeasible. So we agree that somewhere above 0% and below 100% taxation there is some optimal amount. However, given the circumstances of the country and our personal philosophies, we may disagree on that optimal level. The fact that free people can move to lower (or higher!) tax jurisdictions, and judge the quality of those services based on how much they pay and what they get in return, is a good thing in my opinion. The competition keeps politicians from elevating taxation to that unworkable 100%.
- techsupporter 8y ago
  > The fact that free people can move to lower (or higher!) tax jurisdictions, and judge the quality of those services based on how much they pay and what they get in return, is a good thing in my opinion. I think few would disagree that if you move to a new jurisdiction to benefit from a different tax scheme, that's fine. But therein lies two problems: First, so few people are able to move; the wealthy are disproportionally able to have their pick of tax jurisdictions so they can extract benefits from one society and then jump ship when it suits them without returning benefits to that society. Second is when people move on "paper" to benefit from another jurisdiction but don't physically move in reality. Thus they continue to benefit from the society they nominally "left" but don't pay into it. That's the kind of tax avoidance / evasion that most people have a problem with.

rectang 8y ago

The passage I quoted is about evasion, not avoidance. To give a bit more context, the prior sentence speaks of "misuse". > The Organisation for Economic Co-operation & Development is scrutinizing the potential misuse of these schemes. In October 2018, it released a blacklist of 21 jurisdictions, including Malta and Cyprus, that it believes are undermining international efforts to combat tax evasion. What we're talking about here is hiding assets that are subject to taxation. Like Swiss banks did for many years.