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The state goes out of their way to encourage it. Let's say you just won the startup lottery and you've got a significant amount of now tradable stock. Some of
by toast0 2y ago
The state goes out of their way to encourage it.
Let's say you just won the startup lottery and you've got a significant amount of now tradable stock. Some of which was early exercised and the cost basis is effectively zero. Some of which was RSUs or non-qualified options and you owe ordinary income. And that you're way over into the top tax brackets.
If your zero cost basis stock is Qualified Small Business Stock (QSBS), there's a very nice discount on federal capital gains, so you might not need to do the rest of the stuff.
Otherwise, if you donate your apprechiated zero basis stock, you get to save federal capital gains of 20% + 3.8% net investment income. Plus it offsets against your ordinary income that's 37%. So that's a 60.8% discount on being charitable for the feds. If you live in California, capital gains are regular income, so you're saving 13.3% because the capital gains go away and offsetting 13.3% on your ordinary income, so your total discount is 87.4%. In other words, your difference in cash after taxes for selling $1M of zero basis stock or donating $1M of zero basis stock is $126k.
When the government is telling you it only costs $126k to give a charity $1M, it's pretty compelling. The math used to be different, when you'd get credit for state taxes on the federal return, but that was many years ago now.
- waynesonfire 2y agoExplains why there is a non-profit writing sudo in Rust recently featured on HN.
- jorvi 2y agoThat is not their argument. You lowering your tax rate and giving that money to charity isn't magicking more money into the world, it is just a different allocation. The government's tax income is allocated by the masses (in theory anyway). It is fair and dispassionate. Philanthropy / charity is picking winners and losers based on your personal whims, and for many it is about gaining social capital.
- zozbot234 2y ago> You lowering your tax rate and giving that money to charity isn't magicking more money into the world, it is just a different allocation. This is only ever true if you assume that government tax spending is 100% efficient, with nary a fraction of a cent being wasted. I don't think that's a safe assumption.
- intrepidhero 2y agoNo. The assumption is that charity and government have roughly equivalent efficiency. Both government and charities have (wildly varying) overhead and government agencies may enjoy economies of scale that charities do not. Yet another area of the world that contains a surprising amount of detail.
- jonas21 2y agoEven under ideal circumstances, the priority of a government is to serve the needs of its citizens. Sometimes, these happen to align with global needs, and sometimes not. In order to improve global health or address other issues that impact countries beyond where you live, the government (even an idealized version without waste, corruption, or political games) might not be the most effective way to accomplish this.
- jorvi 2y agoRight. But taking the combined $140 billion net worth of Bill and Melinda, about 30% (or whatever 'fair' rate you want to assume) shouldn't have been theirs to give away. Let them spend the other part however they want. What I find kind of interesting is that Bill Gates and Warren Buffet argue that they should be taxed more, but they don't do anything to further that goal aside from media soundbites and headlines. They could fund an incredible war chest for a lobbying apparatus who's sole purpose would be to create a more fair tax system. But no such thing happens.
- skybrian 2y agoSome government programs are good, but if it went to the US government then Trump could cancel them. (Unless the courts stop it.) It seems fortunate that some charitable funds aren't subject to that risk. They have other risks, but they seem lower. In an imperfect world, government funding alone seems insufficiency diversified. That's too much power in one place.
- threetonesun 2y agoCharitable funds fall victim to the same fundamental issue, leadership is more interested in benefiting themselves than putting the money towards the aims of the charity. In general I donate to places local to me. I'd much rather see a bench at a local park than hold on to some hope that my money does something meaningful to a large international charity organization.
- 2y ago
- mmooss 2y ago> The state goes out of their way to encourage it. People with lots of money and power get their representatives to pass laws that reduce their taxes.
- njdas 2y agoYet people still advocate for giving these reps endless increases in taxation.