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How the Rich Reap Huge Tax Breaks From Private Nonprofits
- throwawayqqq11 3y agoAs a side note: One of the primary reasons of how the rich get richer and how public services (our society) degrade is, that we stopped taxing them. For decades now. Imho, its a shift of the represented interests in policies. We should stop pondering enshitification or greedflation an start seeing it as a systemic issue, that we can observe everywhere. https://en.wikipedia.org//wiki/Commodification#In_Marxist_theory https://en.wikipedia.org//wiki/Commodification#In_Marxist_th...
- nobodyandproud 3y agoMost of us here know, but note that the slights of hand are just too good. They can also hire people to shill in every major forum, so there’s a huge uphill battle just to avoid getting drowned out.
- xracy 3y agoI mean... People say this, as if no one knows where the money is, and we've tried everything. When in fact, everyone knows where the money is, and we've tried very little in the ways of actually taxing rich people. I have no doubt that if we actually raised taxation rates (Corporate Stock Grants is an easy one that everyone on here will pretend is impossible), corporations, and rich folks would start paying more in taxes. Maybe they would still dodge, but until we actually start doing something saying "nothing will work" is like saying "there's no way to hammer a nail all the way into a board" when you haven't actually hit the nail with the hammer. Edit: Of course it's un uphill battle if you've done nothing. Everything is an uphill battle when you're not doing anything about it.
- nobodyandproud 3y agoThere’s power in organization, yet the middle class is disorganized. This outcome isn’t by accident and it’s a huge undertaking to just get past the tribal bullshit just to have a sane conversation.
- xracy 3y agoYeah, but that's no excuse to give up without trying... I get it's hard, but it's not impossible. And it's probably just necessary if we want to survive as a species...
- tourmalinetaco 3y agoIt should be noted we still “tax” them, as in the laws in place put income tax down, but they grow wealth by paying people full time to legally skirt taxation via schemes like this. However considering the current state of bloat governments are in, I’m not sure that extra money would actually mean anything. Except more to funnel into the military industrial complex and other black book projects.
- throwawayqqq11 3y ago> I’m not sure that extra money would actually mean anything In an ideal democracy it would. Its yet again misrepresented interests. And as an extend to my side note: The decades long shift of interest representation went from the public to the private sphere. The distrust in goverment may be justified, but its no counter argument, because the means of democratic participation is the only viable tool we have left. FUD helps the parasites. Democracies cannot fail, only the people in it do.
- willcipriano 3y ago[flagged]
- throwawayqqq11 3y agoDo you know the last successful, citizen-only driven revolution? I would guess the french revolution ~1790 and it was a bloodbath. Today, the military technology has extended the power gap so much, that chopping heads off is no option for eg. north koreans without support from the outside. I think a violent revolution would only tighten the surveilance state.
- willcipriano 3y agoThe ven diagram of people who tell me that we can't possibly overthrow the government contrasted with people who say January 6th was a threat to democracy is essentially a circle.
- PrimeMcFly 3y agoIn the US people have been brainwashed to think reasonable taxation is 'socialism' - something they need to have a religious objection to even if they don't know what it is.
- koolba 3y agoThere’s no such thing as “reasonable taxation” because it’s a subjective concept. It’s no better than saying “the rich are not paying their fair share”. Say you’re settling the tab for big dinner at a restaurant, if your rich friend pays for the steak he ordered, is that his fair share? If there’s 100 of you and he pays for 1/100 of the check, is that his fair share? What if he pays for half the tab, is that enough to be his fair share? Is it reasonable for society, through taxes, to take more than half of what you earn? (e.g., in CA the top brackets out you at 37% federal + 12.3% State = 49.3% tax rate. And that’s before sales tax!)
- elmalto 3y agoSure as long as the society spends it on things that it deems important. Why is money made from money not taxed the same money made from labor? On the other hand, if money is considered free speech in the US, how can we even allow taxation at all? Isn’t taxation a form of censorship?
- markdown 3y ago> Is it reasonable for society, through taxes, to take more than half of what you earn? So long as you have more than enough to live on, absolutely. If you make a billion dollars, then the govt taking 501 million is the absolute minimum that should be expected. Better they take 999 million and leave you the million dollars, as you don't need more than that to survive. Further, the only reason you made a billion was from not paying the workers a living wage. The government's job is to redistribute the money so that everyone gets a fair share.
- t43562 3y agoThe point of people being wealthy is that they get to take risks based on their judgement and we hope that benefits everyone. Without a reward nobody will take risks. Governments don't take political risks so you cannot expect them to be the sole chance takers in the economy. What we obviously don't want is people who find a way to dump risk on everyone else so that they cannot fail. Not paying a living wage is a way to do that for example.
- dools 3y agoThe bigger problem is a fear of public spending because of perceived incompetence. The stigma comes from a time when only governments had run big bureaucratic systems. Now we can see there is little difference between public and private bureaucracies except for a lack of oversight on the latter. Still the stigma remains and all public spending is filtered through a profit making entity.
- AlgorithmicTime 3y agoWell, fix government oversight of public bureaucracies and then we can have a discussion. As it is now, it's pretty clear that elected officials have little control and oversight into the bureaucracies that they nominally control and direct. Make bureaucrats firable. End Chevron deference. Bring back political appointments from the top to the bottom of the bureaucracy.
- mistrial9 3y agothis is exactly true in nearby large counties, US West
- macintux 3y ago> Bring back political appointments from the top to the bottom of the bureaucracy. Good heavens no. Turn over the bureaucracy every few years, bringing in political sycophants to replace people who actually understand the system (and, by and large, follow the law instead of kowtowing to the current demagogue-in-charge)?
- AlgorithmicTime 3y ago[dead]
- fifticon 3y agoI see a lot of propaganda expended on convincing the voting public of this "public incompentence", almost as if someone is paying to maintain this status quo.
- refurb 3y agoOne of the primary reasons of how the rich get richer and how public services (our society) degrade is, that we stopped taxing them. Taxes as a percentage of GDP are pretty steady over time. We aren't really taxing less. https://fred.stlouisfed.org/series/FYFRGDA188S https://fred.stlouisfed.org/series/FYFRGDA188S
- tmnvix 3y agoYou can both be right if you assume a shift away from taxing wealth to taxing income (or unearned to earned income).
- throwawayqqq11 3y agoI think tieing tax income to gdp is as deceptive as hiding your income to dodge taxes. The ultra wealthy can shift their assets as they please, the poor cannot. Maybe thats the reason why the graph is steady.
- refurb 3y agoI mean most of the really rich are rich from investments. Unless you're arguing that the banks and large companies are breaking the law by avoiding their reporting requirements to the IRS (to what benefit?) that makes no sense.
- metaphor 3y agoThe games played by the wealthy and well-advised are largely within the gray areas of tax code buried between legal avoidance and illegal evasion[1]...in other words, certain sophisticated behavior remains "legal" if the IRS never gets an opportunity to audit and pursue litigation against. Herein lies the moral hazard bullshit. To tilt these game-theoretic bets overwhelmingly in favor of the wealthy, assert continuous political pressure to defund IRS activity tasked with holding these actors legally accountable while shilling it to the ignorant public with a bullshit title like "Family and Small Business Taxpayer Protection" to bait popular support[2; § 251]. The CBO too is well-advised[3], but the wealthy very much dislike projected outcomes summarized[4] as: > The proposal, by contrast, would return audit rates to the levels of about 10 years ago; the rate would rise for all taxpayers, but higher-income taxpayers would face the largest increase. In addition, the Administration’s policies would focus additional IRS resources on enforcement activity aimed at high-wealth taxpayers, large corporations, and partnerships. [1] https://www.nber.org/papers/w28542 https://www.nber.org/papers/w28542 [2] https://www.congress.gov/bill/118th-congress/house-bill/3746 https://www.congress.gov/bill/118th-congress/house-bill/3746 [3] https://www.cbo.gov/publication/56467 https://www.cbo.gov/publication/56467 [4] https://www.cbo.gov/publication/57444 https://www.cbo.gov/publication/57444
- littlestymaar 3y agoWe stopped taxing them and started to borrow from them instead.
- 00ff 3y agoFalse, we never stopped taxing the rich. We reduced top marginal income tax rates though, so they moved more money into income and stopped hiding as much in shell companies and inventory. The top 1% earn 20% of national income, but their taxes comprise 40% of federal income tax revenue. US Gini coefficient (inequality measure) decreases by a third after accounting for taxes and transfers.
- karpierz 3y agoYou start by saying that wealthy people can pretty freely manipulate the amount of income they show for tax purposes. The follow-up is that based on the manipulated income data, wealthy people pay disproportionately more taxes?
- twoodfin 3y agoRight. The current low rates provide much stronger incentives to accurately report income vs. less efficient tax shelters and in-lieu-of-cash benefits. So we expect taxable income statistics to more accurately capture real earnings than under earlier tax regimes (particularly pre-1986).
- Swenrekcah 3y agoAssets should be taxed progressively. Capitalism results in the power coming from capital. Therefore capital taxes should be the primary taxation mechanism. There are issues with it such as cashflow problems and more, but all systems have issues and they can be overcome.
- jcfrei 3y agoExactly, taxing assets instead of income is a no-brainer. All income that is not used for consumption becomes an asset itself and if people cant consume all their income then that should be taxed. The reason it isnt done is that any country that introduces wealth / assets taxes experiences immediate wealth flight (see Norway for a recent example). A wealth tax can only be done at a global level for example through the OECD.
- tourmalinetaco 3y agoThe Hated One also did a rather informative video covering this topic: https://inv.tux.pizza/watch?v=OH4uh8cHuto https://inv.tux.pizza/watch?v=OH4uh8cHuto
- dredmorbius 3y agoVideo title "Billionaire Foundation - The Most Immoral Charity In The World " (inv.tux.pizza is failing to work for me)
- giords 3y agoI hate all of this
- tyingq 3y agoThere's also the loophole of running a church and designating your home as a "parsonage". Laws vary by state, but there's several that don't mind fully exempting sprawling estates if you represent it as such.
- sidewndr46 3y agoI know someone who looked into this and since the facility was a business 5 days a week & a church on Sunday they gave him a 1/7 tax credit. OTOH it made sense, as all he had to do was find a congregation that wanted to meet there.
- tyingq 3y agoThat seems like a reasonable, legal example. The Houston Chronical found ones that are unfortunately legal, but not reasonable...like: https://archive.is/SPY8K https://archive.is/SPY8K
- taxinaut 3y agoIt’s a ridiculous statute in my opinion, but this is also silly: > That means Copeland’s church gets a pass on what would otherwise be an annual property tax bill exceeding $150,000 — money that other local taxpayers must backfill to cover the cost of schools, police and firefighters. How on earth does this make sense? It’s not like there’s some divine requirement that an exact number of dollars must be paid and now everyone else is on the hook. Taxing rich people more is convenient and mostly accepted but come on, it’s 1 person, they aren’t using more schools/police/whatever.
- jmyeet 3y agoPrivate foundations are really a massive scam on the public purse so whenever you hear about the Gates Foundation and the like, remember it's just a tax dodge, nothing more. The way the rules work, a private foundation has to spend 5% of its capital on its intended purpose. Thing is, that 5% can include "administration" costs like paying salaries and benefits for the family. They really need to raise this to 10%, minimum. Art is a massive tax scam. You should only get a tax deduction on the purchase price (not "appraised value") and only to a public museum and there should be strict requirements as to what a "museum" is. But it's really quite disgusting what lengths billionaires go to to avoid paying for the society that makes their wealth possible.
- the-lazy-guy 3y agoI had a brief look at Gates Foundation spending and it does not look like tax dodge to me: https://www.gatesfoundation.org/about/financials/annual-reports/annual-report-2022 https://www.gatesfoundation.org/about/financials/annual-repo... It spent about 10% of its endowment for charity last year.
- natelegler 3y agoYeah because the Gates Foundation is going to come right out on their website and say that they are a tax dodge...
- gruez 3y agoMind furnishing some evidence of their alleged wrongdoing then?
- scrollaway 3y agoThese are annual financial reports, a very good first step for an investigation. At some point, if someone claims it is a tax dodge, they need some modicum of evidence. None was provided.
- zo1 3y agoCan someone explain how that charity foundation thing is a loophole? Who/what is avoiding taxes?
- mycologos 3y agoI know, I know, "bounties" are a fraught concept. Some people find "snitching" odious. But this is a tantalizing use case. All the author of this piece got out of their legwork was another article, but it also yielded some money for the federal government: > Two days after I emailed Finwall in April inquiring about the Xie Foundation’s purchase of the house, the foundation filed records with the California attorney general’s office, stating that it had “discovered a self-dealing event” and including a federal tax return with the word “amended” handwritten at the top. In his email to ProPublica, Finwall said that, after amending its returns, the foundation “paid some excise taxes related to Mr. Xie’s stay at the property.” Maybe we can give 1% of the recovered tax to forensic accountant bounty hunters willing to vet the appropriate nonprofit filings. As is, the IRS seems under-resourced for this kind of work, and there's no real incentive for anybody else to do it unless they're a journalist -- and you can only write this kind of story so many times. Maybe each submitted case costs $100 or some other fee sufficient to deter spammers. I strongly suspect there's a class of feisty semi-retired accountants who'd be happy to spend some of their golden years on this kind of thing. If we're worried about small nonprofits, we can set a minimum claimed deduction that's subject to a bounty.
- cavisne 3y agoA fraud whistleblower got a 200 million dollar bounty this year from the SEC
- mycologos 3y agoCool! It looks like the SEC whistleblower program has more generous terms than 1% [1]: > The Commission is authorized by Congress to provide monetary awards to eligible individuals who come forward with high-quality original information that leads to a Commission enforcement action in which over $1,000,000 in sanctions is ordered. The range for awards is between 10% and 30% of the money collected. Submitting a tip appears to be pretty simple, too. If you want anonymity you'll need to go through a lawyer, but other than that, it's just a web form [2]? [1] https://www.sec.gov/whistleblower https://www.sec.gov/whistleblower [2] https://tcr.sec.gov/TcrExternalWeb/faces/pages/intake.jspx https://tcr.sec.gov/TcrExternalWeb/faces/pages/intake.jspx
- evancox100 3y agoThere is a house—excuse me, “museum”, in my neighborhood for some guy’s hunting trophy collection. Private tours available on request, of course. What a sham!
- hliyan 3y agoIt has been my observation that it is not that only people of unscrupulous character become wealthy, but wealth tends to make you progressively more unscrupulous, i.e. not care about anything but yourself and your family unless you are legally compelled to do so. In my mind, I've come to call this relative wealth toxicity. We all know of power toxicity (power corrupts). I think wealth has a similar effect on human psychology. The "relative" part is because a modern-day middle class person is, in absolute terms, is wealthier than a medieval lord, but do not behave like one. It is the relative power and the rarified social status that wealth brings, that results in the toxicity.
- 00ff 3y agoI've observed the opposite. The wealthy people I know are philanthropic. Similarly the upper middle class is more altruistic than the lower middle class, and so on down the hierarchy of needs.
- tehwebguy 3y agoThis style and format is not for everyone to say the least but this deep dive from Some More News just dropped a few days ago https://youtu.be/69AtkAHkKEc https://youtu.be/69AtkAHkKEc
- steveBK123 3y agoI visited a park/reserve that definitely walked the line on this stuff. On the one hand it was open to the public 5 days/week, most of the year, provided you purchased!! generally-available tickets in advance. On the other hand after a few visits I learned that the giant mansion at the center of the park was still occupied by the textile baron owner who set up the foundation. This foundation was setup almost as soon as the mansion was built, and he subsequently lived out his days for 30 years there. They also charged to use the estate for weddings/catered events. And they also had the gall to ask people to donate to the foundation. Incredibly, some well heeled locals have given 6 figure donations. It seemed to me an amazing structure to live out your days on a beautiful estate with the upkeep of the incredible garden/art collection partially subsidized by both the government (tax deduction) and public (ticket sales / events / donations). He eventually passed away and the foundation leadership devolved into a circular firing squad but that's a separate issue.
- simonsarris 3y agoHow is this comparable? It seems like they are offering excellent public access. It looks like a very expensive garden to maintain, free for high school and college students, veterans, and children under 12, and just $2 for anyone with SNAP/EBT card (Museums for All pass). That seems very reasonable. It looks like they also put on lots of paid (and free!) performances. This takes a lot of real live human hours to coordinate. https://longhouse.org/collections/tickets https://longhouse.org/collections/tickets
- steveBK123 3y agoWell it's open 3-4.5 hours/day, 5 days/week in season. Fewer days off season. So we're not talking public park levels of access. The bigger question is how much of a tax benefit did he get to live with that arrangement, and what % of the garden was covered by his contribution to the foundation vs other revenue.
- seattle_spring 3y agoAre you by chance talking about the Bloedel Reserve on Bainbridge Island?
- 00ff 3y agoMost commenters here seem to have a false impression of the distribution of taxation. "The rich pay little taxes" is disinfo. The truth is more like "the rich pay most of the taxes." The US has had progressive taxation since 1913. Today, taxes on the top 1% of earners comprise 40% of federal income tax revenue, top 5% comprise 60%, while the bottom 50% comprise 2% (however note income taxes are only half of federal revenue). Per CBO, the US gini coefficient falls by 0.17 (a third) when you account for taxes and transfers. Our legislators have created tons of complexity in our tax codes which people use to reduce their tax burdens. I mainly blame congress and the electorate. Donors are only culpable for funding congressional campaigns' appeals to voters.
- mahogany 3y ago> The truth is more like "the rich pay most of the taxes." By itself, this doesn't really mean much; it certainly doesn't address "fairness". For example, even in an inverted regressive tax system, the rich could still pay the most in taxes. This is simply because they earn the most money. And the larger the ratio between rich and poor, the easier it is for the rich to pay the most in taxes, yet still not be affected as substantially by taxation. Take an extreme example to illustrate: there are 9 earners making $100 per year and 1 earner making $10,000 per year. If the tax rate were 90% for the low-earners and 10% for the high-earner, the high-earner would still pay the most in taxes (more than 50% of total revenue), but few would call this system "fair".
- sesuximo 3y agoI think “top income earners” might be misleading? For the people in the article who donate say 40mil to their foundation and write off that 40mil from their income… if they earned 30mil that year, would they still be counted as a top 1% earner for the year in your metrics? I think you’re right overall about top 50% and top 1%, but I think as you consider ultra wealthy people it might not be as simple (or at least i wonder about more edge cases; maybe I’m wrong)
- jhp123 3y ago"the rich" and "top income earners" are not at all the same group. Many of the richest people make their money through untaxed capital gains.
- dpflan 3y agoWealth is transfer from one part of the economic system to another, and extreme wealth is basically hoarding; why is it so difficult to reach a point of diminishing returns of wealth and then give it back in some way that is more impactful than arbitrary philanthropy? One cannot simply say government is inefficient because it is pretty clear that this current system is inefficient in distributing wealth and raising the living standards and reducing the suffering of others (because it has specifically been degraded and played by the wealthy so that they retain as much wealth as possible). The game of wealth accruing that everyone is playing is simply based on an economic system right now that depends upon money, and is a closed system facilitated by the government. Where else does _money_ come from? There is no other source. (Crypto is a joke, because is basically now valued in terms of fiat, so let's not add that to this discussion. It is also a small part of the bigger economic system, which again is founded upon fiat.) So, this game of an economy founded upon money, what's the point? We no longer act as groups gathering resources from the natural environment; we are now individual actors forced to gather an intermediate resources (money), a reality and an abstraction for resource transfer. I am genuinely curious how the economy can truly be used to reduce suffering of others and create more stable societies. (please note these are armchair philosophy, economics, sociology points, which would benefit from research.)
- SyzygistSix 3y ago>Wealth is transfer from one part of the economic system to another So no wealth is created? The vast amount of medical technology and technology in general would immediately show that this statement is completely false.
- dpflan 3y agoWhat is wealth?
- 00ff 3y agoPhilanthropy is a lot less arbitrary than the vast machinery of misaligned incentives we name government. Like it or not, your tax dollars fund Guantanamo Bay, Trump's family separation/kids in cages, and every other odious federal program. (My state deploys my taxes to terrorize immigrants. Lovely.) Your philanthropic dollars only fund projects you actually endorse.
- bpm140 3y ago“He said that tours are limited because the foundation has only a few volunteer docents who are knowledgeable about the home…” Perhaps they could use some of the $35M in tax breaks to hire some docents?
- habosa 3y agoIf you live in the US and like to donate to charity you can have your own private foundation and you don’t have to be a jerk about it! It can be a convenient way for you to do good in the world. It’s called a Donor Advised Fund and you can donate large sums to it and then direct the money in pieces to charities you support over time. In between the money gets to grow if you choose to invest it, and you get the tax write off at the time of donation not distribution because you can never get the money back. Why would you do this? Well maybe you had a windfall profit one year (sold your company?) and you want to donate a lot of it before the tax year ends but you’re not sure where yet. Or maybe you want to donate something besides cash to a charity without the systems to accept it. Like appreciated shares in your company, or cryptocurrency. If you do this for the right reasons it’s not sinister at all. It’s just a safe and tax efficient way to manage your charitable ambitious. You can even set one up on your phone, in like 10 minutes: https://www.daffy.org/ https://www.daffy.org/ (Note: there’s a lot to argue about when it comes to what counts as a charity in the US and the nearly unlimited nature of the income deductions you can get from donating. But in the end I think as long as the tax code stays the way it is it makes sense for people who can afford it to give some money to a cause they support)
- 6ak74rfy 3y agoTrue. Don’t know about Daffy but I’ve looked at Fidelity Charitable which does something very similar. “Donate” now, save taxes now, distribute the money when you want but let it grow (however you want) until then.
- habosa 3y agoFidelity and Vanguard charitable are two of the biggest DAF providers. Daffy is not nearly as well established but I like the UX. Honestly I just use it because donating to most charities via bank transfer is a massive pain and Daffy makes it simple.
- AlbertCory 3y agoAll true. I wouldn't expect ProPublica to expose the "other" nonprofits, which provide steady employment at high wages to politically favored people. Like the Clinton Global Initiative pre 2016. Or the NGOs who've turned homelessness into a reliable source of government grants. If you go to Charity Navigator, you can find the percentage of the charity's income that goes to "administrative expenses." I seem to recall that CGI had about a 90% figure, but this: https://www.charitynavigator.org/ein/311580204 https://www.charitynavigator.org/ein/311580204 shows more reasonable numbers: 18.3%. They're based on the 2019 IRS form 990, so it's pretty far out of date. Re this "once a week guided tour" stuff: I'd be totally in favor of regulations outlawing that. If the taxpayers gave you an exemption for it, then the taxpayers get to see it. Edit: since the usual HN reply is "do you have a citation for that?" here they are: https://sfstandard.com/2022/04/27/the-standard-top-25-san-franciscos-top-paid-homeless-nonprofits/ https://sfstandard.com/2022/04/27/the-standard-top-25-san-fr... The largest is Episcopal Community Services: https://www.charitynavigator.org/ein/951945256 https://www.charitynavigator.org/ein/951945256 which shows five people making $100K or close to it. The second largest is the Tenderloin Housing Clinic: https://www.charitynavigator.org/ein/942681706 https://www.charitynavigator.org/ein/942681706 with five people making well over $100K.
- seattle_spring 3y agoDo you expect qualified people to work for these charities for free? 100k is not a lot in SF, and it's very likely the people in those roles could make multiples more at private organizations.
- AlbertCory 3y ago1) how do you know they're "qualified"? Which leads to... 2) the Civil Service has rigorous rules on fair, non-discriminatory hiring. Do these orgs? 3) I don't know how you could know "it's very likely the people in those roles could make multiples more at private organizations." For all we know, they're people who've never had a private sector job in their lives. 4) Why can't the SF civil service do these functions? 5) What incentive do these orgs have to actually solve the problem, when their very existence depends on it continuing?
- mihaic 3y agoHonestly, why isn't there a general indignation against the concept of tax breaks for any charitable contribution? I'm generally not aligned with the libertarians, but let's just lower taxes and simply let people give wherever they want. The only real benefits that non-profit structures like a 501(c) should be that their donations aren't taxed as income, and that's it.
- wskinner 3y agoIn America, there is broad implicit approval for the idea that the tax code should be used to encourage (discourage) desirable (undesirable) behavior. We may quibble about the definition of desirability, but most Americans do seem to support this.
- sesuximo 3y agoI think the idea is “the government should take money from projects for the greater good” … this is a concept that is 100s of years old
- gumby 3y agoWhy is there even the concept of a "nonprofit", with tax deductible donations? This has never made any sense to me.