5 ms·

Private 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,

by jmyeet 3y ago

Private 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 ago
I 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 ago
  Yeah because the Gates Foundation is going to come right out on their website and say that they are a tax dodge...
  - gruez 3y ago
    Mind furnishing some evidence of their alleged wrongdoing then?
  - scrollaway 3y ago
    These 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 ago
Can someone explain how that charity foundation thing is a loophole? Who/what is avoiding taxes?
- kevingadd 3y ago
  What the OP described is that as a rich person you can set up a "charity foundation", donate a bunch of money to it (reducing your tax burden), then have the foundation hold on to most of the money and when it spends it, spend it on "administration", which could be hiring your friends and family to do fake administrative work In the case of the Gates Foundation it's more likely to be real administrative work, but even the "good" ones are sitting on a ton of money that could potentially be put to more profitable (for society) uses
- avidiax 3y ago
  What do you want to do as a rich person? * Own and enjoy fantastic properties: - You own so many properties that you'll spend maybe a few weeks per year in each one - So donate these properties to your own charitable foundation, give tours while you aren't there. * Have lavish parties - Call it a charity ball, hold an auction at some point, now you look great and the canapés are tax-free. * Fly private - Book a meeting for your charitable purpose wherever you are going. Now you can deduct at least part of the gas for the private jet. * Enrich your friends and family members - Give them sweet jobs in your foundation. Pay them competitive salaries without going through a competitive candidate search. Continue this even after you die, essentially a tax-free annuity. * Lobby for your own business and ideological interests - Your private foundation can advocate for all sorts of things. Fund self-serving studies. Give full-ride scholarships to top thinkers that think like you. Host tours, vacations, parties and events that benefit your position. * Improve your social standing - Give some money to PBS. Open a wing at a school or museum with your name on it.
  - gruez 3y ago
    >- Give them sweet jobs in your foundation. Pay them competitive salaries without going through a competitive candidate search. Continue this even after you die, essentially a tax-free annuity. It's not "tax free" when those salaries are taxed just like any other salary.
resoluteteeth 3y ago
I don't think it's actually a "tax dodge" because having the money donated to a nonprofit does limit what the money can be for and to the extent salaries are paid back to family members that's getting taxed anyway (theoretically they could be shifting it to lower tax brackets but when you look at current US tax rates it's not going to make much difference anyway). I think there's a real question of whether rich people should be able to get tax exemptions for donating massive amounts of money to nonprofits of their choice with no limit, but it's not a "scam" because Bill Gates is doing exactly the thing that the current tax code is intended to incentivize; he's not using some sort of complicated loophole to use the money for personal purposes while getting a tax exemption, he's just using it for charitable purposes that he chooses, exactly as intended. That said, personally I don't think it necessarily makes sense to say that someone should be able to e.g. choose to donate a billion dollars of income to an art museum and not get taxed when the tax revenue from that income if it were not made deductible (even if less than a billion dollars) could be used for potentially more important uses once you factor in marginal utility, etc. Framing it as a "scam" or "loophole" is somewhat misleading imo because it implies that rich people are somehow cheating the system, whereas in reality they are just using the system as intended, but it might actually be a bad system.
00ff 3y ago
The Gates foundation likely gets more altruistic bang for its buck than any government on the planet, and plausibly more than any other organization of any sort.
dtgriscom 3y ago
Characterizing the Gates Foundation as "just a tax dodge" is a pretty hot take.
boeingUH60 3y ago
The Gates foundation example makes no sense and frankly reeks of ignorance. The foundation has given out over $70 billion in grants since inception [1]…money that came primarily out of Gates’s pockets. In what way does losing $70 billion imply a tax dodge because he avoided paying $10B to $20B in taxes had he kept that money for himself? You know, he could have simply paid the taxes and kept the remaining $50 billion in in his pockets.
Guvante 3y ago
You can't donate money to dodge taxes. You need to donate a good and have it be overvalued or maintain control over it. Gates mostly donated shares who have a fair value (market value). Gates similarly has control over direction but isn't using the majority of the funds for self enrichment.

by jmyeet 3y ago

the-lazy-guy 3y ago

I 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 ago
Yeah because the Gates Foundation is going to come right out on their website and say that they are a tax dodge...
- gruez 3y ago
  Mind furnishing some evidence of their alleged wrongdoing then?
- scrollaway 3y ago
  These 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 ago

Can someone explain how that charity foundation thing is a loophole? Who/what is avoiding taxes?

kevingadd 3y ago
What the OP described is that as a rich person you can set up a "charity foundation", donate a bunch of money to it (reducing your tax burden), then have the foundation hold on to most of the money and when it spends it, spend it on "administration", which could be hiring your friends and family to do fake administrative work In the case of the Gates Foundation it's more likely to be real administrative work, but even the "good" ones are sitting on a ton of money that could potentially be put to more profitable (for society) uses
avidiax 3y ago
What do you want to do as a rich person? * Own and enjoy fantastic properties: - You own so many properties that you'll spend maybe a few weeks per year in each one - So donate these properties to your own charitable foundation, give tours while you aren't there. * Have lavish parties - Call it a charity ball, hold an auction at some point, now you look great and the canapés are tax-free. * Fly private - Book a meeting for your charitable purpose wherever you are going. Now you can deduct at least part of the gas for the private jet. * Enrich your friends and family members - Give them sweet jobs in your foundation. Pay them competitive salaries without going through a competitive candidate search. Continue this even after you die, essentially a tax-free annuity. * Lobby for your own business and ideological interests - Your private foundation can advocate for all sorts of things. Fund self-serving studies. Give full-ride scholarships to top thinkers that think like you. Host tours, vacations, parties and events that benefit your position. * Improve your social standing - Give some money to PBS. Open a wing at a school or museum with your name on it.
- gruez 3y ago
  >- Give them sweet jobs in your foundation. Pay them competitive salaries without going through a competitive candidate search. Continue this even after you die, essentially a tax-free annuity. It's not "tax free" when those salaries are taxed just like any other salary.

resoluteteeth 3y ago

I don't think it's actually a "tax dodge" because having the money donated to a nonprofit does limit what the money can be for and to the extent salaries are paid back to family members that's getting taxed anyway (theoretically they could be shifting it to lower tax brackets but when you look at current US tax rates it's not going to make much difference anyway). I think there's a real question of whether rich people should be able to get tax exemptions for donating massive amounts of money to nonprofits of their choice with no limit, but it's not a "scam" because Bill Gates is doing exactly the thing that the current tax code is intended to incentivize; he's not using some sort of complicated loophole to use the money for personal purposes while getting a tax exemption, he's just using it for charitable purposes that he chooses, exactly as intended. That said, personally I don't think it necessarily makes sense to say that someone should be able to e.g. choose to donate a billion dollars of income to an art museum and not get taxed when the tax revenue from that income if it were not made deductible (even if less than a billion dollars) could be used for potentially more important uses once you factor in marginal utility, etc. Framing it as a "scam" or "loophole" is somewhat misleading imo because it implies that rich people are somehow cheating the system, whereas in reality they are just using the system as intended, but it might actually be a bad system.

00ff 3y ago

The Gates foundation likely gets more altruistic bang for its buck than any government on the planet, and plausibly more than any other organization of any sort.

dtgriscom 3y ago

Characterizing the Gates Foundation as "just a tax dodge" is a pretty hot take.

boeingUH60 3y ago

The Gates foundation example makes no sense and frankly reeks of ignorance. The foundation has given out over $70 billion in grants since inception [1]…money that came primarily out of Gates’s pockets. In what way does losing $70 billion imply a tax dodge because he avoided paying $10B to $20B in taxes had he kept that money for himself? You know, he could have simply paid the taxes and kept the remaining $50 billion in in his pockets.

Guvante 3y ago

You can't donate money to dodge taxes. You need to donate a good and have it be overvalued or maintain control over it. Gates mostly donated shares who have a fair value (market value). Gates similarly has control over direction but isn't using the majority of the funds for self enrichment.