Mark Zuckerberg Will Donate 99% of Facebook Shares

[Coach]

Again, I totally agree with your thoughts on Zuckerberg's motives, I'm just pointing out valid reasons why some may be skeptical. Those reasons are largely invalidated by MZ's personality, but that's not something tangible.

[Itse]

Originally Posted by The Yen Man

But isn't that the whole point of giving tax breaks to charities? To encourage rich people to donate part of their money to charity? Does it matter what motives these wealthy people have as long as the money ends up being for charitable purposes?

That's actually highly questionable.

A pretty strong case can be built around the argument that the point of giving tax breaks for charity is to let rich people legally get away with not paying taxes while making them look good in the eyes of the public.

[CorsiHockeyLeague]

Originally Posted by Itse

That's actually highly questionable.

A pretty strong case can be built around the argument that the point of giving tax breaks for charity is to let rich people legally get away with not paying taxes while making them look good in the eyes of the public.

What strong case is that? This makes no sense to me. You get out of paying taxes by giving your money away? Yeah... but you gave your money away.

A dollar is a dollar - if your motivation is to keep more of your money, then you aren't giving it to charity; you're paying taxes, because your after-tax big pile o' cash will still be larger than giving it to charity.

Using the charity rules to end up with more money at the end of the day is called a "leveraged donation" scheme and it results in you being investigated by the authorities.

[VladtheImpaler]

Originally Posted by CorsiHockeyLeague

What strong case is that? This makes no sense to me. You get out of paying taxes by giving your money away? Yeah... but you gave your money away.

A dollar is a dollar - if your motivation is to keep more of your money, then you aren't giving it to charity; you're paying taxes, because your after-tax big pile o' cash will still be larger than giving it to charity.

Using the charity rules to end up with more money at the end of the day is called a "leveraged donation" scheme and it results in you being investigated by the authorities.

Those damn rich people giving away $100 to save paying $40 in taxes on the $100.

[Itse]

Ever heard of all those charity funds that spend very little of their money on actual charity?

They might instead for example buy mansions and jets, or organize events that look a lot more like business meetings than actual charity events.

[calgaryblood]

Originally Posted by CorsiHockeyLeague

What strong case is that? This makes no sense to me. You get out of paying taxes by giving your money away? Yeah... but you gave your money away.

A dollar is a dollar - if your motivation is to keep more of your money, then you aren't giving it to charity; you're paying taxes, because your after-tax big pile o' cash will still be larger than giving it to charity.

Using the charity rules to end up with more money at the end of the day is called a "leveraged donation" scheme and it results in you being investigated by the authorities.

Well if you have to pay the government why not instead make a foundation and pay less money but give it to charity?

I look at it as they're doing good but the motivation is to save on taxes. Yes they're "giving away" money to charity but really they're saving money in the long run. 99% isn't going to charity.

[CorsiHockeyLeague]

Nothing you just said makes sense.

If I have $100 in income, I either have the option of keeping it or giving it to charity.

Let's say I keep the money. I pay tax at, let's say, a 40% rate and end up with $60.

Let's say I give the money to charity. I pay no tax, but end up with $0.

Let's say I give $40 to charity. I get a tax credit for $20, pay 40% tax on the remaining $60 that I kept, use the tax credit and end up with $56.

There is no way that you end up with more money.

Originally Posted by Itse

Ever heard of all those charity funds that spend very little of their money on actual charity? They might instead for example buy mansions and jets, or organize events that look a lot more like business meetings than actual charity events.

No, I have never heard of this, because it broadly speaking doesn't exist. If you fail to spend your resources promoting charitable purposes you get de-registered.

[calgaryblood]

Well that's if he's giving all the $100 away. If he donates $100 but keeps it in his foundation and doesn't pay taxes on it and only actually donates $10 of the $100 he's saving $30.

[CorsiHockeyLeague]

Wtf are you talking about? He already paid taxes on the money before putting it in the foundation. As soon as it's in the foundation it is gone. It can only be spent for charitable purposes. It's not like he can use foundation funds to buy scotch.

[peter12]

Hey, some of you guys. Philanthropy is a good thing. Mark Zuckerberg may look like a virgin, but his motives don't have to be completely pure for him to do some good.

That said, the foundation's goals are hilariously vague. Especially coming from a guy who just invented a website that, sometimes inappropriately, collected, and monetized people's personal information to sell to massive advertisers whose activities have effectively cemented monopolistic power, and are partially responsible for growing inequality in America.

Carnegie, this guy is not. But whatever.

[opendoor]

Originally Posted by CorsiHockeyLeague

Wtf are you talking about? He already paid taxes on the money before putting it in the foundation. As soon as it's in the foundation it is gone. It can only be spent for charitable purposes. It's not like he can use foundation funds to buy scotch.

Not necessarily true depending on how it's set up; these types of things are often set up in part to avoid gift and estate taxes. Here's a description of the trusts that the Walton family has set up:

The type of Jackie O. trust used by the Waltons doesn’t generate a break on income taxes. Instead, the big potential saving is on gift and estate taxes. When a donor sets one up, the IRS assesses how much gift or estate tax is due, based on how much of the trust’s assets will end up benefiting charity and how much will go to heirs. Most donors structure the trusts so that the heirs’ estimated leftover is zero or close to it.

The IRS makes its estimate using a complicated formula tied to the level of U.S. Treasury bond yields during the time when the trust is set up.

If the trust’s investments outperform that benchmark rate, then the extra earnings pass to the designated heirs free of any estate tax. The rate has been hovering near all-time lows since 2009. For trusts set up this month, it’s 1.4 percent.

With a big enough spread between the actual performance and the IRS rate, a Jackie O. trust can theoretically save so much tax that it leaves a family richer than if it hadn’t given a dime to charity.

http://www.bloomberg.com/news/articl...-fortune-taxes

Those trusts were returning 14% a year at the time of that article's writing and were accumulating assets much faster than they were required to donate them so they actually grew in value. And once their term ends, whatever is left can be dispersed tax free. So while they are primarily charitable, in today's low interest rate environment they can also be a method of avoiding taxes.

[calgaryblood]

Thanks. And you did it without being condescending which Corsi has a hard time avoiding.

[Goodlad]

Originally Posted by CorsiHockeyLeague

Wtf are you talking about? He already paid taxes on the money before putting it in the foundation. As soon as it's in the foundation it is gone. It can only be spent for charitable purposes. It's not like he can use foundation funds to buy scotch.

It's not a foundation though. It's an LLC (Limited Liability Company) which Zuckerberg himself will oversee. It has no obligation to spend any of the money on charitable purposes.

As Peter12 said, there's a genuine possibility the money will be spent on good causes whether his motivations are completely charitable or not. I'm just not rushing to praise him until we see what actually comes of this.

[oilfanforever]

I'm currently working for the Bill & Melinda Gates foundation so perhaps I can shed a light on a couple of the reasons why one might choose a LLC over a private foundation. It also worth clarifying that a private foundation is different from a public charity and has many more restrictions on how it operates.

Lobbying - As a private foundation you must operate under specific lobbying restrictions generally meaning we cannot advocate for a specific piece of legislation. In Canada it's even more strict, meaning less than 30 hours per month of engagement with senior government officials, including prep and travel time.

Lobbying in general has a bad name but it can be an important catalyst for change. Depending on the types of changes Zuckerberg is seeking and the policy environment surrounding them, the ability to lobby might be a big asset. This is even more important if the policy changes you seek will have powerful folks lobbying against it.

Public good - As a private foundation, all of the money we spend must be used for public good and believe me, you need to prove it. The fact is, that this creates significant transaction costs when dealing with for-profit entities. It's entirely feasible that they just want to keep things simple, albeit likely with more doubters.

There are many more reasons, such as yearly pay-out rules etc. but overall he will have much more flexibility and this is obviously something he thinks he will need.

As a last point, philanthropy plays an important role in global development and many other sectors. Philanthropists can take risks with their money that others simply can't. The fact that they're willing to take these risks is a good thing for us and more importantly the ones living under extreme hardship. Anyone who commits to the giving pledge should be commended in my mind.

More info on the giving pledge here: http://givingpledge.org/

[CorsiHockeyLeague]

Originally Posted by Goodlad

It's not a foundation though. It's an LLC (Limited Liability Company) which Zuckerberg himself will oversee. It has no obligation to spend any of the money on charitable purposes.

Yes, with the result that it pays tax as a corporation on any income it earns, just like any other corporation. So what's the problem? Please explain to me why you aren't similarly annoyed that, for example, Apple Inc. has "no obligation to spend any money on charitable purposes"?

The use of trusts for estate planning is a whole other animal.