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I frequently see the "they're just doing this for the tax breaks" sentiment for these kinds of donations (especially when the donor is a corporation or hyper-we

I frequently see the "they're just doing this for the tax breaks" sentiment for these kinds of donations (especially when the donor is a corporation or hyper-wealthy individual) but I don't understand the reasoning. From what I understand of tax deductions, a donation of $X basically means that the donor can skip paying taxes on $X of income. This results in a savings of tax% * $X, which is always < $X. Since tax% is always < 100%, it seems that the donation is always negative-sum for the donor. The tax deduction also seems like a boon for the beneficiary, since they receive $X instead of (1 - tax%) * $X. Can you help me understand the cynicism? How does the donor benefit here (aside from PR etc)? It seems like they do not come out ahead financially, and the tax breaks benefit the recipient of the donation.

klipt 7y ago
Yeah the donation deduction is just a form of leverage. You effectively pay X but the charity gets 2X (actual multiplier depends on your marginal tax rate). One way of looking at it is that the government is "matching" part of your donation with tax money. But you never make money that way.
- entangledqubit 7y ago
  You can't make money this way but you can still argue that money that would have gone to taxes has now been redirected by an individual to a cause they solely decided is worthwhile.
  - chki 7y ago
    But actually the state (society) decides which donations are tax deductible.
    - loeg 7y ago
      Well, elected officials decided that very early in the US's history of personal income tax. It's not like we have direct democracy and 2020 society has voted to approve this policy. We didn't have a federal income tax before 1913, and the government added the charitable deduction during the 1917 WWI revenue act, which also raised the personal income tax rates. As far as I know it's simply never been touched since 1917. Some folks just object to that policy.
      - wmf 7y ago
        The IRS still makes case-by-case decisions about which organizations are legally charities so there is oversight.
        loeg 7y ago
        You're not wrong, but I don't think this is responsive to my comment. Maybe replying to the wrong one on accident? (Also: any organization can claim religious status and becomes essentially exempt from IRS review of charitable status. See: Scientology. Not that I expect Bezos' fund to do that.)
        wmf 7y ago
        You make it sound like "decides which donations are tax deductible" was done 100 years ago and never changed which isn't the case. Now if you'll excuse me I have to file some paperwork for the Church of the V8...
        loeg 7y ago
        I didn't say that and I'm sorry it was unclear. I said: > the government added the charitable deduction during the 1917 WWI revenue act The distinction I was trying to draw was that prior to 1917, charitable giving could not be deducted at all, and what changed was that the legislature of the time decided to make it so. It's 100 years ago, but really not that long compared to the history of this country. If you want to say the IRS represents the will of society, I think I would mildly disagree. They're not elected. That said, they are largely governed by rules set forth by the legislature, who are at least elected, if not always representative.
  - nck4222 7y ago
    Which is the point of the tax deduction in the first place.
  - ukoki 7y ago
    > You can't make money this way Are you sure? What about something like this: 1. Buy art for $1M 2. Get your friends to bid up the price of the art by selling other works from the artist to each other at inflated valuations 3. Donate art to art gallery with a valuation of $10M 4. Deduct $10M donation from your taxes
    - humbledrone 7y ago
      That's simply tax fraud.
    - chki 7y ago
      I've seen this (exactly this, actually) line of reasoning regarding taxes and art before. While I think that it is somewhat relevant it's still not legal to do that, at least not where I live.
    - gok 7y ago
      A) that's fraud B) you still need $10 million of income to deduct C) this isn't making money. You can't directly deduct a collectible or security you donate. You can give it away without realizing any capital gains however.
      - loeg 7y ago
        (A) Yes. (B) Replace $10 mill with any figure up to 30% of your actual income. The figures are illustrative, not binding. (C) Consider not doing the fraud vs the fraud. If you and your buddy both do the fraud, you only expend the purchase price but deduct the higher price. As a result you have generated a deduction from thin air. As long as the higher price multiplied by your marginal tax rate is greater than the lower purchase price, you've made money. So at, say, a hypothetical 50% bracket, you need to inflate it by 100% to break even. At a 25% bracket, you'd need to inflate it by 300% to break even. It's a profit, but it's definitely fraud and seems pretty obvious. It's essentially a pump and dump scheme, but instead of selling the inflated asset, you donate it while it's still inflated and deduct the difference against income.
        7y ago
  - hndamien 7y ago
    The objective is to make wealth, not money.
wtracy 7y ago
The argument seems to be that the donor is not making any actual financial sacrifice, and therefore shouldn't enjoy any publicity or goodwill for their non-sacrifice. There's also this cynical idea that these donations are made purely for PR purposes, not out of any desire to do good. But that's intangible and unquantifiable.
- jlokier 7y ago
  But the donor is making an actual financial sacrifice, a large one, as the GP explained.
  - wmf 7y ago
    Maybe. If Amazon buys $10B worth of electric trucks and clean energy (which coincidentally saves them money and increases the stock price) then Bezos hasn't sacrificed anything. But calling it a fund makes me think this is not the case. Anyway, philanthropy shouldn't be measured in terms of sacrifice.
- ahartman00 7y ago
  "donations are made purely for PR purposes, not out of any desire to do good" I dont understand this sentiment(not saying you agree with it). Let's express this as a contract: in exchange for 3 compliments, 4 pats on the back, and 2 rounds of applause, $WEALTHY_PERSON agrees to donate $LARGE_AMOUNT to a charitable cause. Let's also assume that $WEALTHY_PERSON is proficient in business, and wont continue to contract with parties who do not honor their end of the bargain. Assuming you want these charitable contributions to continue, would it not be prudent to give them their 3 compliments, 4 pats on the back, and 2 rounds of applause?? Not that I am saying all wealthy people donate for no other reason than for pr. Just that if you think that, you might not want to go out of your way to tell them that they are not getting what they wanted.
smallgovt 7y ago
I think ultimately this cynicism is born out of envy/jealousy for the good will that such a donation engenders. As you've pointed out, any logical analysis would conclude that, even in the most extreme cases, there's still a sizable positive benefit to society. People have a problem with "undeserved" good will as if good will is some scarce resource that's limited in supply. I think the reality is they're envious.
- deleted 7y ago
  [deleted]
- tetris11 7y ago
  Angry. The word you are looking for is angry. Its just a constant reminder that we live at the mercy of these elites, that our tax dollars don't appear to have any effect in bringing about the change that we want because these scumbags have rewritten the laws in their favour so that the money only concentrates towards them. What can we do about it? Absolutely nothing, but I'm sure as hell not going to pander to their 'benevolence'
  - GreenJelloShot 7y ago
    Is there anything Bezos could do at this point that would NOT make you angry?
    - mercer 7y ago
      Somehow use most of his filthy amount of wealth, much of it acquired in filthy ways, to things that are not him? I'm perpetually baffled at how one person having this much wealth is somehow considered okay. Sure, we can argue about where it goes instead, but jesus christ is this an unfathomable amount of wealth that really shouldn't be in one person's control.
      - GreenJelloShot 7y ago
        I honestly cannot understand this attitude. It sounds like pure jealousy. You are saying that we should stop people from being too successful. Bezos earned all of his wealth honestly. He offered products and services for prices that people were willing to pay. He did not steal. He did not force anyone into anything. If he is stupid rich, it is because he was able to provide things people wanted more effectively than anyone else. How can you possibly justify punishing success? What right do we have to give him money for doing what we want, and then turning around and taking it away. What sort of message does that send to other people? "Work hard and be successful, but not TOO successful..."
loeg 7y ago
Personal income tax deductions are additionally capped at 50% of income (and maybe 30% for unearned income? I forget the specifics). So if Bezos' income is $1/year, basically none of this would be deductible if it came from his personal fortune. That said, I think GP is expressing skepticism that the total $10B figure comes from Bezos' personal fortune rather than being a spending plan for AMZN's business. The article doesn't exactly make this clear.
- inerte 7y ago
  > That said, I think GP is expressing skepticism that the total $10B figure comes from Bezos' personal fortune rather than being a spending plan for AMZN's business. The article doesn't exactly make this clear. Yep, more along these lines. Lots of people are latching on the "tax break" but I thought I made a larger point about where the $10b figure is coming from. That's part of my cynicism: Bezos gets to write a great headlines with big rounding number like $10b, but I wonder what kind of creative accounting will be applied here.
  - loeg 7y ago
    It's also quite possible it's not $10b upfront, but rather a non-binding commitment to contribute $10b over some number of years.
    - dantheman 7y ago
      I'd bet it will be over a number years -- it'd be next to impossible to spend 10b in year in any reasonably responsible way.
- gok 7y ago
  Bezos can avoid that limit by donating his Amazon shares directly
  - loeg 7y ago
    No, he can't. That's exactly what the lower 30% limit is on — gifts of appreciated capital. If he sold the shares first, he could claim up to the higher 50% limit. But he'd owe capital gains taxes on the sales, which is almost certainly more than the additional deduction.
yardie 7y ago
You should read the book the OP mentioned. Most of the charities these billionaires donate to are also under their control. So the beneficiary and the benefactor are one and the same. Sometimes the moons align and the billionaire, the charity, and the public good are all served. Other times you get the Trumps' version of charity. And in some cases they can be harmful, such as the founder of Mozilla donating to charities that were anti CA Prop 8. These charities are a way to bypass the democratic method of funding public goods. I don't believe the US military budget should be as big as it is. Yet I pay taxes that fund it whether I agree to it or not. If I was a millionaire I could fund a religious school that taught white Jesus as the one true religion instead of funding secular state schools. The bigger problem is the people who have created many of these problems now want to be in control of the solutions.
inerte 7y ago
I did _not_ say he's doing this just for tax reasons. I asked if the $10b are really $10b that won't result in any tax breaks? Is Bezos letting go of $10b, or will he get a deduction, perhaps using a similar formula to the one you posted? We're being duped on headlines such as "Bezos commits to $10b" when his net worth won't be affected by that much. The cynicism comes from the PR, sure, but also from a preservation perspective. I doubt any of the grants Bezos is giving will result in research that shows in any way what Amazon is doing is bad for the environment. It won't propose an increase in taxes on gas based engines like lawn mowers, shipping plastic from overseas, selling meat based products, or if Amazon moved Prime to 5 days shipping instead of 1, it could bundle deliveries and reduce trucks on the street and the gas it uses. And for sure, it won't be a critical view of the American consumerism (which is fueled and promoted and enhanced by retailers like Amazon) and how if the world had even 1/10th of the standard of living of the US the planet would be in flames right now. It will probably be something like investment in renewable energy, electric trucks, drone delivery. All new stuff, investment opportunities, things that coincidentally help Amazon while helping the world. Don't get me wrong, it's all stuff we need, but the cynicism comes from Bezos being committed to fighting climate change as long as it doesn't take his money, and actually, it should probably make him money in the process.
- humbledrone 7y ago
  > the cynicism comes from Bezos being committed to fighting climate change as long as it doesn't take his money, and actually, it should probably make him money in the process. If this is the way it works out, isn't that actually pretty great? I mean, I personally find Amazon to be quite useful, so it if could continue being an economically viable business while also fighting climate change, I'd be very happy.

klipt 7y ago

Yeah the donation deduction is just a form of leverage. You effectively pay X but the charity gets 2X (actual multiplier depends on your marginal tax rate). One way of looking at it is that the government is "matching" part of your donation with tax money. But you never make money that way.

entangledqubit 7y ago
You can't make money this way but you can still argue that money that would have gone to taxes has now been redirected by an individual to a cause they solely decided is worthwhile.
- chki 7y ago
  But actually the state (society) decides which donations are tax deductible.
  - loeg 7y ago
    Well, elected officials decided that very early in the US's history of personal income tax. It's not like we have direct democracy and 2020 society has voted to approve this policy. We didn't have a federal income tax before 1913, and the government added the charitable deduction during the 1917 WWI revenue act, which also raised the personal income tax rates. As far as I know it's simply never been touched since 1917. Some folks just object to that policy.
    - wmf 7y ago
      The IRS still makes case-by-case decisions about which organizations are legally charities so there is oversight.
      - loeg 7y ago
        You're not wrong, but I don't think this is responsive to my comment. Maybe replying to the wrong one on accident? (Also: any organization can claim religious status and becomes essentially exempt from IRS review of charitable status. See: Scientology. Not that I expect Bezos' fund to do that.)
        wmf 7y ago
        You make it sound like "decides which donations are tax deductible" was done 100 years ago and never changed which isn't the case. Now if you'll excuse me I have to file some paperwork for the Church of the V8...
        loeg 7y ago
        I didn't say that and I'm sorry it was unclear. I said: > the government added the charitable deduction during the 1917 WWI revenue act The distinction I was trying to draw was that prior to 1917, charitable giving could not be deducted at all, and what changed was that the legislature of the time decided to make it so. It's 100 years ago, but really not that long compared to the history of this country. If you want to say the IRS represents the will of society, I think I would mildly disagree. They're not elected. That said, they are largely governed by rules set forth by the legislature, who are at least elected, if not always representative.
- nck4222 7y ago
  Which is the point of the tax deduction in the first place.
- ukoki 7y ago
  > You can't make money this way Are you sure? What about something like this: 1. Buy art for $1M 2. Get your friends to bid up the price of the art by selling other works from the artist to each other at inflated valuations 3. Donate art to art gallery with a valuation of $10M 4. Deduct $10M donation from your taxes
  - humbledrone 7y ago
    That's simply tax fraud.
  - chki 7y ago
    I've seen this (exactly this, actually) line of reasoning regarding taxes and art before. While I think that it is somewhat relevant it's still not legal to do that, at least not where I live.
  - gok 7y ago
    A) that's fraud B) you still need $10 million of income to deduct C) this isn't making money. You can't directly deduct a collectible or security you donate. You can give it away without realizing any capital gains however.
    - loeg 7y ago
      (A) Yes. (B) Replace $10 mill with any figure up to 30% of your actual income. The figures are illustrative, not binding. (C) Consider not doing the fraud vs the fraud. If you and your buddy both do the fraud, you only expend the purchase price but deduct the higher price. As a result you have generated a deduction from thin air. As long as the higher price multiplied by your marginal tax rate is greater than the lower purchase price, you've made money. So at, say, a hypothetical 50% bracket, you need to inflate it by 100% to break even. At a 25% bracket, you'd need to inflate it by 300% to break even. It's a profit, but it's definitely fraud and seems pretty obvious. It's essentially a pump and dump scheme, but instead of selling the inflated asset, you donate it while it's still inflated and deduct the difference against income.
      - 7y ago
- hndamien 7y ago
  The objective is to make wealth, not money.

wtracy 7y ago

The argument seems to be that the donor is not making any actual financial sacrifice, and therefore shouldn't enjoy any publicity or goodwill for their non-sacrifice. There's also this cynical idea that these donations are made purely for PR purposes, not out of any desire to do good. But that's intangible and unquantifiable.

jlokier 7y ago
But the donor is making an actual financial sacrifice, a large one, as the GP explained.
- wmf 7y ago
  Maybe. If Amazon buys $10B worth of electric trucks and clean energy (which coincidentally saves them money and increases the stock price) then Bezos hasn't sacrificed anything. But calling it a fund makes me think this is not the case. Anyway, philanthropy shouldn't be measured in terms of sacrifice.
ahartman00 7y ago
"donations are made purely for PR purposes, not out of any desire to do good" I dont understand this sentiment(not saying you agree with it). Let's express this as a contract: in exchange for 3 compliments, 4 pats on the back, and 2 rounds of applause, $WEALTHY_PERSON agrees to donate $LARGE_AMOUNT to a charitable cause. Let's also assume that $WEALTHY_PERSON is proficient in business, and wont continue to contract with parties who do not honor their end of the bargain. Assuming you want these charitable contributions to continue, would it not be prudent to give them their 3 compliments, 4 pats on the back, and 2 rounds of applause?? Not that I am saying all wealthy people donate for no other reason than for pr. Just that if you think that, you might not want to go out of your way to tell them that they are not getting what they wanted.

smallgovt 7y ago

I think ultimately this cynicism is born out of envy/jealousy for the good will that such a donation engenders. As you've pointed out, any logical analysis would conclude that, even in the most extreme cases, there's still a sizable positive benefit to society. People have a problem with "undeserved" good will as if good will is some scarce resource that's limited in supply. I think the reality is they're envious.

deleted 7y ago
[deleted]
tetris11 7y ago
Angry. The word you are looking for is angry. Its just a constant reminder that we live at the mercy of these elites, that our tax dollars don't appear to have any effect in bringing about the change that we want because these scumbags have rewritten the laws in their favour so that the money only concentrates towards them. What can we do about it? Absolutely nothing, but I'm sure as hell not going to pander to their 'benevolence'
- GreenJelloShot 7y ago
  Is there anything Bezos could do at this point that would NOT make you angry?
  - mercer 7y ago
    Somehow use most of his filthy amount of wealth, much of it acquired in filthy ways, to things that are not him? I'm perpetually baffled at how one person having this much wealth is somehow considered okay. Sure, we can argue about where it goes instead, but jesus christ is this an unfathomable amount of wealth that really shouldn't be in one person's control.
    - GreenJelloShot 7y ago
      I honestly cannot understand this attitude. It sounds like pure jealousy. You are saying that we should stop people from being too successful. Bezos earned all of his wealth honestly. He offered products and services for prices that people were willing to pay. He did not steal. He did not force anyone into anything. If he is stupid rich, it is because he was able to provide things people wanted more effectively than anyone else. How can you possibly justify punishing success? What right do we have to give him money for doing what we want, and then turning around and taking it away. What sort of message does that send to other people? "Work hard and be successful, but not TOO successful..."

loeg 7y ago

Personal income tax deductions are additionally capped at 50% of income (and maybe 30% for unearned income? I forget the specifics). So if Bezos' income is $1/year, basically none of this would be deductible if it came from his personal fortune. That said, I think GP is expressing skepticism that the total $10B figure comes from Bezos' personal fortune rather than being a spending plan for AMZN's business. The article doesn't exactly make this clear.

inerte 7y ago
> That said, I think GP is expressing skepticism that the total $10B figure comes from Bezos' personal fortune rather than being a spending plan for AMZN's business. The article doesn't exactly make this clear. Yep, more along these lines. Lots of people are latching on the "tax break" but I thought I made a larger point about where the $10b figure is coming from. That's part of my cynicism: Bezos gets to write a great headlines with big rounding number like $10b, but I wonder what kind of creative accounting will be applied here.
- loeg 7y ago
  It's also quite possible it's not $10b upfront, but rather a non-binding commitment to contribute $10b over some number of years.
  - dantheman 7y ago
    I'd bet it will be over a number years -- it'd be next to impossible to spend 10b in year in any reasonably responsible way.
gok 7y ago
Bezos can avoid that limit by donating his Amazon shares directly
- loeg 7y ago
  No, he can't. That's exactly what the lower 30% limit is on — gifts of appreciated capital. If he sold the shares first, he could claim up to the higher 50% limit. But he'd owe capital gains taxes on the sales, which is almost certainly more than the additional deduction.

yardie 7y ago

You should read the book the OP mentioned. Most of the charities these billionaires donate to are also under their control. So the beneficiary and the benefactor are one and the same. Sometimes the moons align and the billionaire, the charity, and the public good are all served. Other times you get the Trumps' version of charity. And in some cases they can be harmful, such as the founder of Mozilla donating to charities that were anti CA Prop 8. These charities are a way to bypass the democratic method of funding public goods. I don't believe the US military budget should be as big as it is. Yet I pay taxes that fund it whether I agree to it or not. If I was a millionaire I could fund a religious school that taught white Jesus as the one true religion instead of funding secular state schools. The bigger problem is the people who have created many of these problems now want to be in control of the solutions.

inerte 7y ago

I did _not_ say he's doing this just for tax reasons. I asked if the $10b are really $10b that won't result in any tax breaks? Is Bezos letting go of $10b, or will he get a deduction, perhaps using a similar formula to the one you posted? We're being duped on headlines such as "Bezos commits to $10b" when his net worth won't be affected by that much. The cynicism comes from the PR, sure, but also from a preservation perspective. I doubt any of the grants Bezos is giving will result in research that shows in any way what Amazon is doing is bad for the environment. It won't propose an increase in taxes on gas based engines like lawn mowers, shipping plastic from overseas, selling meat based products, or if Amazon moved Prime to 5 days shipping instead of 1, it could bundle deliveries and reduce trucks on the street and the gas it uses. And for sure, it won't be a critical view of the American consumerism (which is fueled and promoted and enhanced by retailers like Amazon) and how if the world had even 1/10th of the standard of living of the US the planet would be in flames right now. It will probably be something like investment in renewable energy, electric trucks, drone delivery. All new stuff, investment opportunities, things that coincidentally help Amazon while helping the world. Don't get me wrong, it's all stuff we need, but the cynicism comes from Bezos being committed to fighting climate change as long as it doesn't take his money, and actually, it should probably make him money in the process.

humbledrone 7y ago
> the cynicism comes from Bezos being committed to fighting climate change as long as it doesn't take his money, and actually, it should probably make him money in the process. If this is the way it works out, isn't that actually pretty great? I mean, I personally find Amazon to be quite useful, so it if could continue being an economically viable business while also fighting climate change, I'd be very happy.