Comment by hsitz | Hacker News Reader

Comment by hsitz | Hacker News Reader

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Most charitable gifts are a form of tax avoidance (and _all_ of them potentially are if a person's income is such that it makes sense to take advantage of itemized deductions). People get receipts for charitable contributions precisely so they can deduct those amounts from their taxable income. Zuckerberg's plan is of much larger scale, but the fact is that the tax code is set up to encourage charitable contributions by making them non-taxable. The tax code is set up this way, quite understandably, to encourage individuals to make charitable gifts, by creating an extra "bang-for-your-buck" for people who choose to make them.

The linked article seems to suggest that Zuckerberg is trying to take advantage of the system by gaining tax-exempt status while effectively _not_ making charitable gifts, that he is somehow trying to pass everything to the child while taking advantage of tax-exempt status of a charitable organization. I'm skeptical both that his intent is to try to do this, and that there is any scheme that could legally accomplish this.

On a different, but related, note, if I were a parent with $40Bn (or $30Bn, $20Bn, $10Bn, or even $1Bn) I would certainly avoid any plan where the bulk of my estate was to be left to my child. Having that much money is a big responsibility, and it's not something that's likely to add to a person's quality of life. Quite the contrary, it's likely a hindrance, not something I would want to saddle my child with. At most, leave them some large amount ($5M, $10M, $20M, $50M?), something basically guaranteed to make them a wealthy person who doesn't need to worry about money, but hopefully not enough to require that responsible management of their fortune be a main focus of their life. (I realize there are moral implications of having that much money for anyone who has even $10M -- perhaps even $1M -- but when the amounts get astronomical, say to hundreds of millions or more, the moral responsibility really does -- or should -- become almost overwhelming. Not a burden I'd want to put on my child.)

I've never understood that about deducting charitable donations. I've always had the principle that I shouldn't be getting anything for my charity. Otherwise, it wouldn't really be a donation to me. It would be make it conditional. I'm giving this money away, but give me some back from the taxpayers?

I might sound like a sucker, but that's just always been my thought on it. My mother once said something to me like that as a kid and I've applied it donating.

You never end up with a net plus by giving to charity; you are always giving away money. This is because the amount of tax you avoid is always less than what you gift. For example, you may gift $100, which ends up reducing your tax bill by, say, $30. If charitable gifts weren't tax-deductible the equivalent would have been paying $30 in taxes and having $70 left over to give to charity (for same $100 loss). The tax-advantaged status gives charitable gifts an extra bang-for-your-buck by giving you same net result (total outgo of $100) while allowing you to direct all $100 to the charity of your choice.

Also, notice that you're not somehow "getting something back" from other taxpayers in this scenario. You're just lowering your tax bill.

The reasons are mainly historical, but the non-profit lobby (consisting of charities, 501c3 non-profit organizations, churches and university endowments) holds so much power, that stripping them of tax-sheltered status would be a third rail for any politician running for office.

The historical reasons assume that many everyday community efforts (feeding the hungry, sheltering the homeless, abused women and children, planting trees, sheltering stray animals) is better done (and financed) at community level by community efforts rather than by central government and sending money to Washington D.C.

> People get receipts for charitable contributions precisely so they can deduct those amounts from their taxable income.

I don't understand how this is considered tax avoidance? It's not like you get more money this way, you just get to give slightly more to charity than you might otherwise, which is the point of the deduction.

It's tax avoidance because if you hadn't gifted that $100 to charity then your taxable income would have been $100 higher and you would have paid higher taxes. You "avoided" paying tax on the amount that you gifted to charity.

By that definition, taking a lower-paying job is "tax avoidance" in exactly the same way.

Not really. Taking a lower-paying job not only avoids taxes, it lowers your income (both pre-tax and after-tax).

With charitable giving you can avoid taxes but still retain exactly the same after-tax income (assuming that you were going to gift to charity regardless of whether you got deduction or not). That is, you can gift $100 to charity, deduct the gift, and so avoid (say) $30 in tax. In this case the gift to charity effectively results in you having $100 less than before. Or, for same net result to you (minus $100), you could gift (after-tax) dollars to charity, say $70, and pay the $30 in taxes that you avoided in previous scenario. Only in second case you ended up giving only $70 to charity, because $30 goes to government. In first case you gave all of the $100 outlay to charity, avoided the $30 tax.

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