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How Mark Zuckerberg's Altruism Helps Himself (nytimes.com)
HughPickens.com writes: Jesse Eisinger writes in the NYT that if you heard that Mark Zuckerberg donated $45 billion to charity, you are wrong. Here's what really happened: Zuckerberg did not set up a charitable foundation, which has nonprofit status. Instead Zuckerberg created an investment vehicle called a limited liability company (LLC) that can invest in for-profit companies, make political donations, and lobby for changes in the law. What's more an LLC can donate appreciated shares to charity, which will generate a deduction at fair market value of the stock without triggering any tax. "He remains completely free to do as he wishes with his money," writes Eisinger. "That's what America is all about. But as a society, we don't generally call these types of activities 'charity.'"
A charitable foundation is subject to rules and oversight. It has to allocate a certain percentage of its assets every year. The new Zuckerberg LLC won't be subject to those rules and won't have any transparency requirements. According to Eisinger what this means is that Zuckerberg has amassed one of the greatest fortunes in the world — and is likely never to pay any taxes on it. "Instead of lavishing praise on Mr. Zuckerberg for having issued a news release with a promise, this should be an occasion to mull what kind of society we want to live in," concludes Eisinger. "The point is that we are turning into a society of oligarchs. And I am not as excited as some to welcome the new Silicon Valley overlords."
A charitable foundation is subject to rules and oversight. It has to allocate a certain percentage of its assets every year. The new Zuckerberg LLC won't be subject to those rules and won't have any transparency requirements. According to Eisinger what this means is that Zuckerberg has amassed one of the greatest fortunes in the world — and is likely never to pay any taxes on it. "Instead of lavishing praise on Mr. Zuckerberg for having issued a news release with a promise, this should be an occasion to mull what kind of society we want to live in," concludes Eisinger. "The point is that we are turning into a society of oligarchs. And I am not as excited as some to welcome the new Silicon Valley overlords."
Altruism speaks?
It was land, then railway, then oil, then information technology. Now, it's cloud services; there will always be a 'job creator' to take the position of overlord. The problem is the recent habit of giving them multiple tax breaks means they create fewer and fewer jobs to feed the 'trickle-down' fallacy that Reagonomics invented.
Another multimillionaire fleeing taxes while pretending to be for charity. I so did not expect this stunt to be anything else. /sarcasm
I imagine this move allows ownership of the LLC to be transferred to his children without invoking an inheritance tax. However, I suspect he intends to create something like the Bill & Melinda Gates Foundation; it's enough money it could be distributed to numerous semi-autonomous sub-organizations to figure out how to spend, and be directed towards thousands of different projects, many of which would fall outside the scope of a normal charity. For example, how many charities directly engage in R&D? At most they'd funnel money towards companies already doing desired research, but if none currently exists? It could do things like what Google X does.
Making shady donations to charity for tax writeoff purposes is nothing new. I remember in the late 90s Microsoft donated large amounts of software to charity, and used its retail value (which they are able to arbitrarily set!) to calculate the value of their charitable donation. Of course since it's an infinite good it costs them near nothing.
Corruption is convincing someone that the selfless ideal is the same as their selfish ideal.
You don't think the 1.5 billion dollar Clinton foundation exists to be charitable ? Or the Howard Hughes Medical institute was anything more than a way to keep control of the money all the while reducing the effective tax rate ?
One of the best things we could ever do for the country is simplify and rationalize the tax code, so it wouldn't be worth it to risk dodging it, and it was obviously fair to all involved. The 1986 tax reform act was a great step in that direction. It is a crying shame we haven't done more.
"an investment vehicle called a limited liability company (LLC) that can invest in for-profit companies, make political donations, and lobby for changes in the law."
An LLC is not an investment vehicle in any sense of the word. Nevertheless, an LLC can donate to charity just as easily as a person does. Curious how that was left out of his article.
However, in the case of my shares, they'd appreciated in value considerably since I received them. I helped set up a non-profit charity, and billed them $400 for my services. They didn't have the cash, so paid me in shares instead. 15 years later those shares were worth $16k. I wasn't really interested in the money, so I donated them back to the charity. When doing my taxes this year, I ran across this tax peculiarity. I never sold the shares so I never received $16k in income, and so didn't have a capital gains tax liability on $15.6k. Yet by donating the shares I got a deduction as if I did have a capital gains tax liability.
That seemed wrong, so I asked two different CPAs about it.
The net result is the same in both cases - I get no money, charity pays no money, charity gets all the shares. But the tax implications are very different.
When I explained it like that, they scratched their heads for a bit, one hit the books and researched it a bit, and both came back to me with the same answer. Yeah it's weird and seems wrong, but that's the way it works.
" you'd be paying taxes on money you gave away."
The point here is, that he didn't give it away, its in a company that he controls, so really he just gave it to himself.
Water is wet.
There have been high net worth people in my family who have left their money and assets to various people , universities, and entities - WITH instructions on what was to be said with said inheritance. The wishes were never followed through. Even with the intervention of the living people it was basically impossible to have the money and assets used as instructed. The lesson is to give your money or assets while you are living. Enjoy what you have and share it. Because if you think it will do XYand Z when you are gone, you are only kidding yourself. So what the Gates, the Buffets, the Zuckerberg's are doing is the responsible thing. They all realize that that kind of money is beyond their needs, and having such a large amount of money can accomplish great things that otherwise could not be accomplished. I look forward to seeing what they do in the future.
So he ultimately intends on donating the entire amount to charity, and the amount he doesn't donate is taxable? Aside from non-specific complains about wealth distribution, I don't see the big deal here???
I thought nonprofits didn't have shares, just members.
And from the way you squeal, ISIS must be causing YOU a lot of pain. I guess that they must be as right as CfMP too.
"I wonder if this swine has the balls to Google "racist roots of Planned Parenthood" "
Oh, I have them. But why on earth is the fact that some shithead has a grudge and no brains and has posted on the internet a screed ANYTHING to do with the lies that you lapped up because you LOVED the claims (killing babies?!?!?! YOU LOVE THAT! It makes you fantasize about killing people and pretend you're RIGHT for doing so!) the pile of made up garbage that was the faked video claims from that fake charity org?
Why is it you went all SQUIRREL!!!! when the fact is that you rightwingnutjobs LOVE the fake charity, you want it faking charity till the cows come home, but only in support of your insane ideology? Did you think it would work???
And from the way you squeal, ISIS must be causing YOU a lot of pain. I guess that they must be as right as CfMP too.
"I wonder if this swine has the balls to Google "racist roots of Planned Parenthood" "
Oh, I have them. But why on earth is the fact that some shithead has a grudge and no brains and has posted on the internet a screed ANYTHING to do with the lies that you lapped up because you LOVED the claims (killing babies?!?!?! YOU LOVE THAT! It makes you fantasize about killing people and pretend you're RIGHT for doing so!) the pile of made up garbage that was the faked video claims from that fake charity org?
Why is it you went all SQUIRREL!!!! when the fact is that you rightwingnutjobs LOVE the fake charity, you want it faking charity till the cows come home, but only in support of your insane ideology? Did you think it would work???
Umm, what's "faked" about Center for Medical Progress's videos?
All those videos do is show what really happens at abortion centers. Given that abortion is literally killing an unborn baby, that's going to be ugly.
The real question is why that truth makes YOU post "internet ... screed[s]".
And you really DO need to read Margaret Sanger's own words about blacks being "undesirables". Because that's ANOTHER truth you seem unable to face.
Why do I get the impression you were raised in a "safe place" where actual thinking was NOT encouraged?
That's noting else than to leave some money within your company without paying out your own earnings. Thats normal, does every member of a company every year. Nothing to see here, please move along ..
Considering how crap these people are at doing anything useful with their money, I'm doubtful we're going to see much else done by the rich worth a damn in our lifetime. Like where is the billionaire spending $100 million on proving if Polywell reactors work or not? It's not like that $100 million is going to anything more worthwhile (sorry solar research has already beaten coal for cost, and medical research is waaaay more expensive than $100 million.) So seriously, where is the guy willing to take a crap shoot on a real technological advancement that will help humanity? Musk trying to do space cheap is a joke considering he hasn't even attempted to leave LEO yet. There are very few serious projects and even fewer getting the funding they need. But by all means, lets keep giving taxbreaks so these assholes can buy more yachts and jet planes.
Both he and his wife will be paying tax: Zuckerberg defends his new philanthropic initiative.
What's that you say? The NYT reporting sensationalist untruths? Where did I leave my monocle...
This is how crony capitalism works. Perverse incentives in the tax code are exploited, so that rich insiders can avoid paying fair shares in taxes. Not saying I agree with significantly increasing taxes on the rich, but it does make it harder to break past that glass ceiling if you don't know how to strategize around unnecessarily complex tax laws which actually impose unnecessarily economic costs of their own in the grand scheme of things.
I mean some people's tax rates are just criminally low even after deducting charitable contributions from their income.
Quite a few people get filthy rich off of non profits and charities for that matter.
Never give money to a charity or non profit.
Imroving the living standard of the poor cant be done through giving. Every attempt at this has failed. Building profitable industries, helathy markets and good education facilities is the way. So if Mark wants to do it through an investment firm thats fine by me. If he will get even richer by this then it is well earned money.
Read up on the charity that Andrew Carnegie did with his fortune. He did it out of his moral obligation. He is the gold standard.
Gates and Zuckerberg are doing hardly anything and are mostly dodging taxes legally. And I'd rather their money pay two weeks of Social Security because it's helping Americans and our horrible economy - not pissing it away in some Third World shithole.
These foundations are one great big tax avoidance, fraud and wealth parking vehicle. Nothing whatsoever to do with charity or philanthropy at all which is merely a cover. After all, when you say the word charity you get the brainless idiots coming out to do your defending for you. It was amusing to see the bum shuffling from various anonymous cowards on the Gates Foundation article.
In my head Zuckerberg's move It's a way to start cashing in on stock with out to many people noticing:
It sells 1 billion worth, no problem it's for the charity.
I would do the same if I knew my business it's not sustainable on the long run.
45 billion in stock can quickly lose all it's value.
Doesn't anyone think FB will go the way of MySpace at one point?
When someone does anything really bad, we compare that person against the worst possible example and praise the "better" stuff. (Example: Remember that jerk Mr ABC who stole petty cash from the block party fund? Well, at least he did not set his dogs on kids trick-or-treating, there is some good in him).
I don't know whether Zuckerberg is truly altruistic interested in doing chariy and believes in his own ability to do it better than the current modi operandi of charity work, or it is some weird tax dodge only a billionaire can afford to execute.
But I think *everything* is ultimately selfish, and no action, however seeming altruistic it seems prima facie, will ultimately have a selfish motive. Obvious direct selfish motives are of course fortune, fame, power, lust etc. Then comes altruism benefiting one's close relatives, more distant relatives, ones clan, tribe, nation or race, species. At this level no act can be really considered purely altruistic.
sed -e 's/Chuck Norris/Rajnikant/g' joke > fact
Wow. That's what those foundations do: buy shill time to troll through "social media".
Billions go a long way, I suppose.
Must be nice to have so much income, you actually have to do this. Meanwhile, in the real US...
Seriously, it's his money. He can donate it, bury it, burn it, or turn it into little paper pterodactyls.
For the people insisting he should have more tax liability, that's ridiculous. His wealth came largely from the internet which yes, was a government-built thing. But
a) everyone pays already for their internet connection
b) Facebook has by now probably paid hundreds of millions of $ for their internet connection
The internet is PAID-FOR already.
To assert that he should pay more is comparable to you and I betting privately on a football game, but saying that the winner should give some of the wager to the football team.
-Styopa
....a "big "fuck you" to the American mainstream media who spun this in that prick's favor all week.
We'd probably all be better off with no news at all than this click bait bullshit system we've ended up with.
LLC is a legal status (literally, Limited Liability Company), not a tax status. an LLC can be a partnership or an S-Corp. If its a partnership, all the profits & losses go to the owners of the LLC. If its an S-Corp, the S-Corp pays taxes on the profits and the owners pays taxes on any profits distributed to the owners. The only "tax dodge" at work here is that Zuckerberg transferred his facebook shares to the LLC for no compensation. No matter what something might be valued at, you have to transfer it in return for something of value before you owe taxes.
The Snopes website did an analysis of the tax implications and control issues. They also elicited additional comments from a Facebook representative. http://www.snopes.com/2015/12/...
Those are three really crooked reasons I'm fine with Mr Z doing as he damned well pleases with his money.
Perhaps when the playing field is leveled for all then individuals should be singled out but right now, he who plays by the crooked rules of his choice, wins.
Perhaps the idiot flat-tax whiners should be really glad he doesn't decide to run for the Republican nomination and cause the ultimate meltdown and total demise of the Republican party. Personally I would laugh my ass off if he did. "I'll see your 500 million and raise you 5 billion", protected speech my ass.
When you compare the fiscal antics of Wall Street hedge fund bros like Martin Shkreli with those of Mark Zuckerberg, et.al., I'll take the fiscal antics of Silicon Valley billionaires anytime.
While he does this, he demands politicians let him import more foreign workers to further depress the wages and benefits of all middle-class Americans always whining that he cannot afford to pay more for American workers and by implication will go broke if not allowed to import.
Reminder: his company, like Apple, Microsoft and Google, etc are used to determine the "prevailing wage" for the entire industry, which everybody else's wages and benefits are compared to. If you are an employee in the US, your wages are affected by his H1-B visa crap.
Unfortunately, 90%+ of our journalists self-identify as Democrats and Zuck is a Democrat who funds lots of Democrat stuff and in addition most of these journalists are stupid enough to have Facebook accounts so they've outed themselves as having no concern for his soul-sucking privacy-selling business - so he gets nearly universal love from the press as they fawn over the cute baby pics and his "amazing" and "generous" plan to escape paying taxes. All the "little people" (as-in insignificant, not physical stature) in "fly-over country" (everywhere that's not NYC, SF, LA, or D.C.) will be expected to pay the taxes Zuck is not paying to maintain the national infrastructure, keep social security and medicare going, make the interest payments on the nation debt - AND do so on reduced wages, thanks to Zuck.
facebook is blocked at my current work, and I will check it in the evening, and I am doing that less and less as the site is just vomit crap now. Time to move to pinterest before facebook gets myspaced.
They flow through to the owner. So if the LLC makes investments and earns income - that income flows through to Zuckerberg and he pays taxes on them. In fact, a trust is a BETTER tax deferral vehicle as it's a separate entity, and most who set up trusts use the assets of the trust (homes, cars, etc.) without paying for them OR paying taxes on the profits earned by the trust. And if the trust earns profit, as long as it gives away 90% of the profit (meaning, it keeps 10%) it does so tax-free.
No, an LLC is a worse tax deferral vehicle than a trust.
Browsing at +1 - no ACs, I ignore their posts. So refreshing!
How is this different from Andrew Carnegie? He gave from his personal assets and set up an off the books company to manage his donation whims. Some of those donations were to for-profit companies, some to existing trusts and some were to individuals on the basis that they would set up a trust. Unfortunately Carnegie did not have the benefit of the current LLC process, so a percentage of all those that were deemed investments ended up in the coffers of the federal government, where most of it would go on pork projects. How much more could he have done if he'd had the benefits of Zuk'.
" if you heard that Mark Zuckerberg donated $45 billion to charity, you are wrong."
Really? Even if I didn't believe it, just by hearing it, I'm wrong?
Ideology: A tool used primarily to avoid the bother of thinking.
Ummm. Everything? You know, the bits where it claims baby parts were being sold, which wasn't happening. The bit which was supposed to have been the aborted baby in a dumpster, when it was actually stillborn, not aborted? Among a host of other lies and fabrications in it.
"Given that abortion is literally killing an unborn baby" No it isn't. It's not a baby until it's born. But you don't know what the hell it is you're talking about, all you know is what you were primed for, in the hope that you will go shoot dead several full grown innocent adults.
"And you really DO need to read Margaret Sanger's own words about blacks being "undesirables". " And you've just called them undesirables. Given you had to quote one single word and therefore lose all context, the reasons why you avoid that context are just as transparent as the horrendously biased editing that CMP did to get some half-assed accusations faked up on camera is.
You don't know what she said because ALL YOU HAVE is what you've been told.
And you were willingly accepting lies before, and you are doing so again.
I keep reading these comments about how he is another rich tax dodging fat cat that is screwing the poor etc. You know the usual bullshit...
Here is the reality (or at least my version of it). He put 45 billion of his own cash (he didnt have to) into a new business that will invest in whatever projects he believes will show promise and then donate ALL of the profits to the charities of his choosing. You greedy crybabies are crying because you cant choose what charities he donates to or what he invests in (via the government).
This class warfare crap they indoctrinate you with in school might be the real problem.
A smart guy is trying to do good with his own money in the most efficient way he can come up with and you are indignant because you cant spend HIS money YOUR way.
No, this is how Taxes work. The rich can always avoid taxes, and the middle class always gets nailed by them. I call it for what it is. All taxes are regressive. Those that can avoid them will always avoid them, and search for ways to avoid them. This is not evil unto itself.
What is evil is the tacit belief that YOU (WarJolt) are somehow entitled, via taxation, to other people's money, and have the right to direct that money into government for it to waste as it sees fit, rather than spent as the person who earned it sees fit. How much taxes must we pay to avoid your "Criminal" Label?
IMHO taxing wealth is criminal, because it always (every time) hits the middle class the hardest. These are the people least able to avoid paying these kinds of taxes. Don't blame the rich for tax avoidance, blame the people who think taxing wealth is a good tax policy.
Agent K: A *person* is smart. People are dumb, stupid, panicky animals, and you know it.
I am still trying to figure out how a site that lets you post vacation pictures for the world to see and create virtual cliques of people that you never really associate with, is worth $45 billion.
We were discussing a very rich guy getting good PR from announcing he will give away his fortune in a way that involves him staying rich and controlling the foundations he creates to supposedly give it away. This scam so many extremely rich people, many of them Democrats, have done. These very rich people dodge massive taxes themselves while demanding higher taxes, which they are fully aware will only hit the middle class, and backing all the class-warfare rhetoric of the modern progressiveDemocrats. They also champion all sorts of government give-away programs which are funded by the taxes they are not paying but make them seem sensitive to the poor. This is the lowest, worst form of hypocrisy.
Then you come along and post this bit of insanity:
"...only one party currently has every one its candidates for the Presidency declaring that the number one problem the country faces is that the rich pay way too much in taxes, and the number one solution to all our problems are slashing those taxes. Its not the Democrats sweetheart."
[a] The Republicans are actually putting terrorism higher on the list of priorities.
[b] The Republicans are not insisting the rich pay too much - they are insisting that everybody who's paying is paying too much and that they economy is paying the price
[c] All these Democrats pulling what Zuckerberg is up to are, in effect, saying "the rich pay way too much in taxes" and working the system to fix it. The list of Democrats doing it are include Gate, Buffet,Soros,The Kennedys,The Rockefellers, and more. Those Republican tax cuts you apparently disdain are at least proposals to properly change the laws to help a wide swath of the public. These wealthy guys are the most self-centered of them all, unilaterally cutting their own taxes by evading them by manipulating the system, and yes most are Democrats, cupcake ;-)
Because the free market relies on everyone having perfect knowledge, otherwise the rational actor cannot make the decisions expected for the system to actually work. But if you have insider information, this is information other actors do not have, and therefore you corrupt the free market.
It's his money. Not yours. Not the governments. I notice that everyone who's complaining has never themselves been in a situation where they were trying to decide how to make the best use of billions of dollars. All the outrage boils down to two things:
1. A small and mis-guided cynicism that he's trying to be smart with the money rather than just dumping wheelbarrows of money into the streets. Those who're in this category also seem to have some misgivings that the money will be abused to push some kind of agenda. Well, money and power are always used to push an agenda. The Federal Government is no different. So whether he gives the money to Gates' charity or to the Fed or tries to manage it himself is really just poh-tay-toh vs. pah-tah-toh vs. toh-may-toh vs. toh-mah-toh.
2. An entitled anger on the part of the speaker that the money isn't going to be funneled back into the redistribution machine called the Federal Government and thus wind up benefiting them. Those who fall into this category are basically saying "How dare he be smart with his money rather than give some of it to me?!"
YOUR error is believing that just because you can avoid taxes, that they must be inherently evil.
How the fuck do you pay for the police to keep the crime rate down if you don't pay someone to take a bullet for you? That's taxing.
From the way this pig is squealing, Center for Medical Progress must be causing him lots of pain.
I wonder if this swine has the balls to Google "racist roots of Planned Parenthood" Nothing like a rich, sheltered, white woman calling black children "undesirables" and working really hard to make sure they're never born...
Or maybe you're completely wrong.
Most of his stock in Facebook was via options rather than grants because during all of the anti-dilution grants he could not afford to tax bill inherent (and it would be a tremendous personal risk) to actually receiving grants OR exercising those options.
When he exercised his options, he had to sell enough stock to cover the taxes on the stock he retained post-exercise. He paid a SH**LOAD of tax on his 'fortune.'
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I grew up in a small town in the middle of the country that could not have afforded a library back in those days. Andrew Carnegie built a beautiful library for that town as he did for many small towns all around the country. When I was a little kid I used that library all the time, never knowing the history of that building until many years later. Without that charitable act by Mr Carnegie, long before I was born, I would never have been able to spend so much time there going through the shelves and checking out and reading everything from "The Wind in the Willows" to "20,000 Leaques Under the Sea".
Oh for modern "robber barons" to be 1/10th as charitable as the old guys who were so branded.
Instead of guys like Zuckerberg and Gates setting up foundations they will control to use their cash to do all the stuff they would have done anyway and calling it "charity" while boldly advertizing how great they are, I would like to see people challenge these fellows to build libraries and hospitals in small towns and poor innner-cities across the nation where the locals simply lack the resources. New York City has a huge tax base and can build these things itself. Nowheresville, Kansas (a fictitious name to represent any small town of say 6000 people) or a place like a poor Detroit suburb cannot, and would be genuinely blessed with such charity.
What Gates and Zuckerberg and others are really saying is that traditional charities and government programs have not worked. They would rather decide themselves where the money goes. Personally I don't really have a problem with that.
Remember, Bill Gate's mother was a charity big wig so I'm sure that he got a good luck at how they operate. I have worked for a few of them and in my experience there was a lot of waste and inefficiency. If I were really rich I would be hesitant to hand over millions (or billions) of dollars knowing that 30-40% of it was going to get pissed away. The other thing is that after you hand over the money you have no real control over how it is spent. You can request that it gets spent on this or that but you can't control it.
Government is the same way. Some people think they should just pay up and give the money to the government for the greater good. That would be fine if every government expenditure wasn't mired in politics, corruption waste and abuse. Unfortunately many of them are.
So they decide to have control over how their money is spent.
Two things to keep in mind:
1) It is, after all, their money. We can argue over how they earned it but it is their money.
2) Is what they are doing a tax dodge? Maybe, maybe not. But what they are doing is legal. If the system is crooked then blame the government. They are the ones that crafted the laws.
Alfonso Capone didn't pay taxes either.
Ha ha
A tax on income is very different from a tax on wealth. The only way to get as rich as these people are is to exploit the fact that pure capitalism is broken; the rich use their money to get more money, and their wealth grows exponentially. The only way to stabilize capitalism is to tax their wealth (again, NOT the income), before they accumulate so much influence that they overwhelm the democratically elected government. You could make a compelling argument that this has already happened in America, but who knows; it may not be too late. If enough oligarchs don't want to their children to live in an oligarchy (even if they are oligarchs), they could relinquish power by lobbying to fix the tax code. In Europe there have been monarchs who have relinquished power as long as they still get to keep their titles and their government funded palaces; maybe that would work for America's super-rich too. (I'm an American living in the "Kingdom" of Belgium)