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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."
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.
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.
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.
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.
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
Must be nice to have so much income, you actually have to do this. Meanwhile, in the real US...
....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/...
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.
(http://www.npr.org/sections/thetwo-way/2015/11/30/457900449/bill-gates-and-other-billionaires-pledge-to-take-on-climate-change)
Prejudice is no substitute for empirical data. Why not take a trip to a public library and get some. Then, thank Carnegie for there being public libraries.
He's always struck me as borderline altruistic.
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'.
I hope that what you wrote wakes up two or three mouthpieces for the "you didn't build that" lobby into realizing that, yes, your tax dollars did build that.
Gamingmuseum.com: Give your 3D accelerator a rest.
" 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.
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... Zuck is a Democrat ...
Not according to "Zuck". Your diatribe is more or less correct over all, but trying to put an "evil Democrat" spin on it is stupid.
Both parties have been way too Plutocrat friendly for decades now, but 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.
Starships were meant to fly, Hands up and touch the sky - Nicky Minaj
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.
The statement of fact is that this is not a charitable donation. If the press release said, Mark Zuckerberg set up LLC to lobby, then no one would care. Lipstick on a pig, is still a pig.
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?!"
The reason that he shouldn't pay taxes on his shares is that his FB shares have not been used in any taxable event (like being sold or conveyed to another). Whether FB is doing anything or paying anything is beside the point; it pays its own bills and/or taxes regardless of the actions of any of its shareholders, even a majority owner (if Z. is).
To assert that he should pay more on non-taxable events, such as just owning his FB shares, is to identify themselves as clients of the government, or wannabe clients at least. Entirely to be expected from ACs.
He's always struck me as borderline.
Il n'y a pas de Planet B.
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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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.