[darawk]

Giving a 50 million dollar donation does not mean you owe zero tax on 100 million of income. It means you owe exactly the same amount of tax on every dime you kept. Deducting charitable donations just means reducing your income by that amount. You still pay tax on all the rest.

Secondly, there are annual limits on the amount you can deduct, percentage wise. What the limit is exactly is circumstantially contingent, but you are not allowed (generally) to zero out your income even if you donate 100% of it.

That being said, I agree that donating to universities is one of the dumber forms of philanthropy.

[fsckboy]

giving a 100 million dollar donation allows you to subtract 100 million from your income (assuming you had a lot more income, there is a limit) which at a 50% tax rate means you gave $50 million out of your account and the charity received $100 million into theirs, the rest coming from the govt in the form of taxes you would have given them but they didn't get from you.

non-profits accepting donations will allow you to structure them as is tax advantageous to you, say $10 million a year for 10 years, is announced as a $100 million donation.

but with appreciated assets something trickier happens. Say I paid $10 million for a block of stock, and it appreciates to $110 million. If I sell it, $100 million of that is income, but I donate the income so I don't have to pay tax on it... However, if I don't sell the stock, and just donate $100 million of it as stock, my charitable contribution is $100 million, and there is no tax on the $91 million portion which is income (did I do that arithmetic right?) and therefore I can deduct the $100 million donation from an additional $100 million of income completely unrelated to this block of stock. The US treasury and public will never see any tax for all that income, and will give me a break on the rest of my taxes.

[Shaanie]

Seems a pretty obvious solution to this loophole is to reduce non-cash deductibles by what would have been paid in capital gains, and have the non profit pay capital gains when they sell?

[fsckboy]

I don't know if there's an easy answer, the question is how valuable to society is it for large donations to be made to all the things that qualify as non-profits? The public likes the idea of philanthropy, and the type of elites who have access to political networks like these types of institutions.

My goal/interest here is simply to be transparent about how it works; how it works could be a good thing, I don't know. The wealthy donors are giving lots of money; the question is, is it ok for wealthy elites to give a chunk of money, let's call it 50%, and influence where the money goes in a way that's similar to and impacts govt budgets that are set politically? There are plenty of rich people on both the left and the right; but elitism is a separate issue.

[jimnotgym]

I have really enjoyed your comments on this thread fsckboy.

> The public likes the idea of philanthropy

I think that may be because very rich donors can afford good PR. Also there are few politicians strong enough to say, "sure x spent 100m on postgrad study of his niche interest, but if the treasury had got it instead it could have spent it on teaching everyone's kids to read and write".

I think a (real) cap on tax deductability would have a interesting consequence. a) the government has more money and better public services. It no longer has to cosy up to a 'philanthropist', helping them look good b) real philanthropists would still donate. However people pursuing dubious interest, like funding niche courses for elite kids at an elite school, would wane. Public stops looking at philanthropy in same way, perhaps

[dahfizz]

> sure x spent 100m on postgrad study of his niche interest, but if the treasury had got it instead it could have spent it on teaching everyone's kids to read and write.

You and I both know that all that money would have gone to defense contactors and hospital administrators if the government had taxed it.

On average, nonprofits provide substantially more public good per dollar than the government does.

[jimnotgym]

This also doesn't have to be true. The same class who are hoarding the wealth are the same class lobbying the government about how to spend tax dollars.

[amluto]

> Secondly, there are annual limits on the amount you can deduct

There are annual “limits”. No sensible mathematician, programmer, economist, or other non-politician would look at the actual formula and think it was a limit.