Question about NGOs, taxes and billionaires; not trying to make this political at all

[JoeyBoy718]

I just read an interesting article about Mark Zuckerberg vowing to donate 99% of his wealth ($45 billion) to charity (his own personal NGO) and I was curious about a few things. I don't want to make this political, but I was just wondering if anyone knew because I've been Googling and can't find the answers.

So my girlfriend is Romanian and says you're allowed to donate up to 2% of the money you would otherwise owe to the government in taxes to charity. I told her I'm pretty sure there is no limit here in America and that a lot of billionaires avoid paying any taxes by donating all their money to charity. The article I read was saying although some billionaires have good intentions, some of their projects fail and it might make people uncomfortable that a small amount of people can control all that money.

So a few questions I had that I couldn't find the answer to:

1) What is the current highest tax bracket (what Bill Gates would owe)? I know it was 94% in FDR's day and up over 99% for a time during Eisenhower's day, but I can't find what it is now. Wikipedia has a chart with the highest being 39% but it seems too low.

2) If you're the richest person in America and you have to pay X% of your income to the government, can you choose to donate all X% to a NGO and not have to pay the government anything? If so, how common is this? If not, how much can you divert to a NGO instead of the government?

Once again, I don't want to turn this into a political debate. I just thought this article was very interesting and I was trying to have a conversation with my girlfriend about it, but there was a lot of stuff that I wasn't sure about. I was wondering if anyone could enlighten me.

 

[Eric_Boyer]

You can only deduct 50% of adjusted gross earnings given to charity. Any more and you still pay taxes on it

 

[Bill Wooten]

I think it is pretty safe to say that the US tax code is more complicated than any other country. You will not get a simple answer to this question other than, "it's complicated".

 

[JoeyBoy718]

I think it is pretty safe to say that the US tax code is more complicated than any other country. You will not get a simple answer to this question other than, "it's complicated".

That's what I figured. That's why I thought I'd ask. Not something you can solve in a quick Google.

 

[LittleBoyBlue]

I think it is pretty safe to say that the US tax code is more complicated than any other country. You will not get a simple answer to this question other than, "it's complicated".

I once heard someone say, a lawyer or someone...... "You need accountants to figure out what the accountants are doing... Then after they defer this and change that... You need accountants to check the first two accountants".

 

[Bill Wooten]

I once heard someone say, a lawyer or someone...... "You need accountants to figure out what the accountants are doing... Then after they defer this and change that... You need accountants to check the first two accountants".

Or as Zevon said, "send lawyers, guns and money"

 

[Hoofbite]

I think they're going to donate 99% of their shares over their lifetimes. $45B now but could be more or could be less.

As for your questions, I'm no expert but I think at least part of your answers may be.

1. The highest federal income tax bracket is 39.6%. Depending on state, could be another 0% or 11% (guess Hawaii has the highest). Then you have SS tax and FICA. Medicare is 2.35% for income over $200K. FICA is 6.2% but it caps out at like $7400, which would be inconsequential to a earner like Donald Trump. At $1M in earnings it works out to like 0.74%. At $10M it would be 0.074$. Not really increasing the effective tax rate for a guy like Trump so just leave it out for simplicity sake.

In total it could be like 53%, but here's the thing, The real billionaires don't pay that amount because their money comes from capitals gains, which isn't taxed at 39.6% percent no matter how great the number is. That's why all these huge CEOs are awarded a ton of stock, but don't really earn as much as you'd think. Tim Cook had his "salary" double to $9M. He pays the high rate on that, but his real money is in the nearly $700M in Apple stock that he will receive over the term of his agreement. While he will pay the high income tax rate on the dollar value of the stock at the time he acquired it, every bit of the dollar value his stock has increased since he acquired it will be taxed as capital gains provided he holds them the prerequisite amount of time to qualify.

Capital gains tax rates range from 0% to 20% depending on the income bracket you fall in. I guess if you were so well off you didn't need to work you could just vacation for a year and claim $0 taxable income and have a 0% federal capital gains tax rate on your capital gains. Not sure if it actually works that way but none of these billionaires pays anything close to the 53%

2. Charitable contributions are a reduction of your taxable income, not a 1:1 reduction of your tax liability. If you have a 39.6% tax rate and donate $10K, your tax liability will drop by 39.6% of $10K. Essentially, you give $100 to to avoid paying $40. Good cause, but your still out the extra $60.

 

[Tabascocat]

He will still be a multi-billionaire, don't think he is being overly generous here and giving away his fortune. This is a business move that tech guys have been using in Silicon Valley.

Yes, giving away some $$$ to charities is great but those charities(actually only one....his) will not be receiving 45 billion to re-distribute.

There is a lot more to this than meets the eye

 

[Yakuza Rich]

I once heard someone say, a lawyer or someone...... "You need accountants to figure out what the accountants are doing... Then after they defer this and change that... You need accountants to check the first two accountants".

It's true. The IRS has a government audit agency that audits their work.

I took Tax Accounting in college. It was the most ridiculous course ever because the professor want us to know the changes of tax laws.

Also, a friend of mine is a CPA and when I asked why the country does not do a flat tax, he agreed with the concept, but said that accounting lobbyists have done everything to prevent a flat tax. Because that would me less jobs for accountants.




YR

 

[LittleBoyBlue]

It's true. The IRS has a government audit agency that audits their work.

I took Tax Accounting in college. It was the most ridiculous course ever because the professor want us to know the changes of tax laws.

Also, a friend of mine is a CPA and when I asked why the country does not do a flat tax, he agreed with the concept, but said that accounting lobbyists have done everything to prevent a flat tax. Because that would me less jobs for accountants.




YR

Thank you for that. Interesting,

I was actually referring... (More playing with the books).....to the facts that accountants(businesses/not irs) have found so many was to defer money and invoices and other tricks.... Count it for next year... Make previous year look profitable... They defer for a Long time.. Then other tax cheats...

Basically, extreme manipulation.

 

[Yakuza Rich]

Thank you for that. Interesting,

I was actually referring... (More playing with the books).....to the facts that accountants(businesses/not irs) have found so many was to defer money and invoices and other tricks.... Count it for next year... Make previous year look profitable... They defer for a Long time.. Then other tax cheats...

Basically, extreme manipulation.

Sure.

I worked for one company that basically had the accountants set themselves up under 35 different names. For instance, if the company was called ABCD Inc., they would have 'subsidiaries' such as ABCD LLC, ABC and D Inc, A and BCD Co., etc.

After I was canned from the company, a good friend of mine was working at a bank and we were out for happy hour and another co-worker of his told me that the company applied for a loan.

I told him that he should be careful because they've been known for handing out the financials for whatever company suits them best. A little while later, he thanked me for telling him that and just left it at the company was up to no good.


Another company I used to work for bought out a company. This company that was bought out was selling off a section of their business and they were so desperate for money that the sale only took a little over 2 months and according to my CEO, when they finalized the contracts, the company being bought out said that we had to send the check into the bank by the end of the day or they may not be in business tomorrow and the deal would be off!

Anyway, it took us a while but later we found that they really cooked the books on us. It looked like a company that was just poorly ran, but had revenue coming in. And like you said, there was a lot of deferring money and invoices going on. Real scumbag stuff.






YR

 

[LittleBoyBlue]

Sure.

I worked for one company that basically had the accountants set themselves up under 35 different names. For instance, if the company was called ABCD Inc., they would have 'subsidiaries' such as ABCD LLC, ABC and D Inc, A and BCD Co., etc.

After I was canned from the company, a good friend of mine was working at a bank and we were out for happy hour and another co-worker of his told me that the company applied for a loan.

I told him that he should be careful because they've been known for handing out the financials for whatever company suits them best. A little while later, he thanked me for telling him that and just left it at the company was up to no good.


Another company I used to work for bought out a company. This company that was bought out was selling off a section of their business and they were so desperate for money that the sale only took a little over 2 months and according to my CEO, when they finalized the contracts, the company being bought out said that we had to send the check into the bank by the end of the day or they may not be in business tomorrow and the deal would be off!

Anyway, it took us a while but later we found that they really cooked the books on us. It looked like a company that was just poorly ran, but had revenue coming in. And like you said, there was a lot of deferring money and invoices going on. Real scumbag stuff.






YR

Wow! And yet I'm not surprised. Yeah, that whole "do it now or deal is off approach" is common scam technique.

I simply walk away! I'll get what I want when it's clear and above board... Unrushed!


Interesting enough.... The movie coming out.... Another premeditated scam in another industry.

Looks real good. Been done already but this looks juicier!


Movie: The Big Short
When four outsiders saw what the big banks, media and government refused to, the global collapse of the economy, they had an idea: The Big Short. Their bold investment leads them into the dark underbelly of modern banking where they must question everyone and everythi

 

[arglebargle]

While reading up on the derivatives market that lead the 2008 crash, I ran across an interesting little tidbit: The guys who designed derivatives (apparently regularly considered the smartest guys in the room) were mostly gone from Wall Street well before the crash. Their favorite destination? Sports management.

 

[Yakuza Rich]

Wow! And yet I'm not surprised. Yeah, that whole "do it now or deal is off approach" is common scam technique.

I simply walk away! I'll get what I want when it's clear and above board... Unrushed!


Interesting enough.... The movie coming out.... Another premeditated scam in another industry.

Looks real good. Been done already but this looks juicier!


Movie: The Big Short
When four outsiders saw what the big banks, media and government refused to, the global collapse of the economy, they had an idea: The Big Short. Their bold investment leads them into the dark underbelly of modern banking where they must question everyone and everythi

The Big Short was written by Michael Lewis, same author of Moneyball and The Blindside.







YR

 

[arglebargle]

The Big Short was written by Michael Lewis, same author of Moneyball and The Blindside.




YR

I think it was Lewis that mentioned the derivatives-sports management connection.

 

[LittleBoyBlue]

The Big Short was written by Michael Lewis, same author of Moneyball and The Blindside.




YR

Interested in movie?
Or are you a book guy only.... and movie can never be truly adapted? Lol

 

[Yakuza Rich]

Interested in movie?
Or are you a book guy only.... and movie can never be truly adapted? Lol

No, I like movies.





YR

 

[Doomsday]

http://www.salon.com/2013/04/12/10_tax_dodges_that_help_the_rich_get_richer_partner/

4. The charity scam. Another way the wealthy avoid paying taxes on their billions is to make charitable donations. If you donate property, you never have to pay income tax on that donation, whatever it costs you and how much it’s worth right now. Well you might say, at least someone benefits from the charity. Whether or not the charitable donation is a scam in whole or in part depends on the answer to that old question: qui bono? Aka, who benefits? That’s where the real scam takes place.

And there’s no legal requirement that a charity must spend its wealth. In fact, IRS rules require only that charities spend about 5 percent of their investment assets annually, and all or part of this amount can be spent on salaries and “expenses,” rather than devoted to the charitable purpose the charity purports to be serving. So, what happens with a charitable trust, set up by a billionaire, and controlled by one of the billionaire’s children? The child gets a job and a salary for life. Maybe a mansion to live in and entertain in as a fringe benefit. This is a great gig for the heir............. Click the link above to continue reading.

 

[LittleBoyBlue]

http://www.salon.com/2013/04/12/10_tax_dodges_that_help_the_rich_get_richer_partner/
4. The charity scam. Another way the wealthy avoid paying taxes on their billions is to make charitable donations. If you donate property, you never have to pay income tax on that donation, whatever it costs you and how much it’s worth right now. Well you might say, at least someone benefits from the charity. Whether or not the charitable donation is a scam in whole or in part depends on the answer to that old question: qui bono? Aka, who benefits? That’s where the real scam takes place.

And there’s no legal requirement that a charity must spend its wealth. In fact, IRS rules require only that charities spend about 5 percent of their investment assets annually, and all or part of this amount can be spent on salaries and “expenses,” rather than devoted to the charitable purpose the charity purports to be serving. So, what happens with a charitable trust, set up by a billionaire, and controlled by one of the billionaire’s children? The child gets a job and a salary for life. Maybe a mansion to live in and entertain in as a fringe benefit. This is a great gig for the heir............. Click the link above to continue reading.

I have big issue with this.
I will one day have a charity that will give 100% to the cause minus only the very necessary expenses.

Such a scam... A lot of them.



Also...
Salvation Army charity..... let's just use a word = conflicting

 

[Tabascocat]

Not sure how old/reliable this is...........