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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.
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.
$45+ billion is juuuuuuust a tad bit more than a "multi-millionaire"
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.
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.
By letting the money run some laps and never realize a profit. Duh.
We used to have a Bill of Rights. Now, with the rights gone, all we have left is the bill.
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.
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.
He gets to 'invest' with it in whatever he chooses, so he will be making more than he will ever lose in some token gesture. Kind of like how Bill Gates has become the richest person in the world again.......somehow. Plus, if he gets the LLC to donate appreciated stocks then there is no capital gains tax. These things are accounting dodges and fraud vehicles, plain and simple.
If the does that it would be the LLC paying him and we would have to pay income taxes on it.
Oh dear. He through his LLC invests in companies who give him expenses and allow him the use of their 'facilities' amongst other dodges, so the whole operation effectively becomes one great big laundering operation. It's also a place to park his wealth for the future out of the gaze of scrutiny. This whole gift culture becomes self-supporting. This was set up by accountants.
This is not something like the Clinton Foundation which is setup as a slush fund for Bill Hillary and Chelsea.
I'm afraid you haven't the slightest idea and are just performing mental gymnastics here.
....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/...
Carnegie was keen to advance from a young age, and was sharp enough to impress those who could help him up. His fortune was built on that, as pretty early on he was invited into a succession of sweet insider trading organized by his mentor, Thomas A. Scott (and John Edgar Thompson). Carnegie would not have convinced his mother to take out a mortgage on the family home so as to speculate with the funds if he didn't absolutely know his investment would pay off big. So, basically, corruption was his real ride to the top. (Surprise!!)
Everything and its opposite is true. Get used to it.