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Why Zuckerberg’s Critics Are Wrong

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Re: Why Zuckerberg’s Critics Are Wrong

#41

Post by dkokelley »

ant6n wrote: post #19
mangeletti wrote: post #15

Here's an idea: Don't allow tax deductions on "charitable" contributions. If, for instance, somebody wants to give $100MM to Central Park, let them do it because they like Central Park that much, rather than because they like it $70MM worth, and the tax payers can cover the other $30MM. Philanthropy is about giving, period. Not giving when it has financial benefits that make it easier at the expense of others.

I think it's perfectly reasonable to deduct charitable contributions - up to say, 10K per year. There exist people who sit on huge amounts of unrealized capital gains. If they donate 100M in stock, then they can sell 100M in stock without ever paying any taxes whatsoever.

Right, but it's still a net loss to them. If I have $200M in unrealized long-term capital gains (taxed federally at 20% for 2015), I have $160M in after tax potential. By donating $100M, I'm losing $60M in potential cash as opposed to paying my fair share. Aside from certain intangible benefits from donating my stock, I'm actively incentivized (to the tune of $60M) NOT to donate.

There is at least one caveat to the above. As long as I donate to a 501(c)(3) entity, I can choose any entity I want - even one I control. The Bill and Melinda Gates foundation is an example of an extremely wealthy couple "donating" to an entity they effectively control. (I assume they do, since it bears their name. I haven't looked up their management structure.) This entity must use their donations in accordance with the entity's stated mission statement, or they risk losing their non-profit status. Beyond this, the donated money is still mostly controlled (within the bounds of the non-profit's stated mission) by the wealthy couple that donated. Aside from using the funds for "pet" projects with dubious public value, this opens up another potential caveat, non-profit bribery.

It is possible for donations or non-profit entity direction to be applied as a tax-free bribe. I might donate to develop a park in a city I hope to win a contract from. I could fund a non-profit campaign for reform on legislation that might benefit an industry my business is in. I could direct a non-profit I control to purchase supplies from a specific vendor as a favor for special consideration in pricing.

Re: Why Zuckerberg’s Critics Are Wrong

#42

Post by jcdavis »

mangeletti wrote: post #40
ant6n wrote: post #19

Earlier quoted context omitted.

I think it's perfectly reasonable to deduct charitable contributions - up to say, 10K per year. There exist people who sit on huge amounts of unrealized capital gains. If they donate 100M in stock, then they can sell 100M in stock without ever paying any taxes whatsoever.

I agree that setting a limit (rather than getting rid of deductions altogether) could be beneficial, while also eliminating a lot of the abuse, but there is one other thing to consider: If the limit is $10,000, the middle class and wealthy gain the benefits of directing tax dollars while the underclass remain unrepresented. I'm a capitalist through and through (you might guess that based on my ideas herein), but givi…

The "underclass" likely already don't gain any benefits because they almost certainly take the standard deduction instead of itemizing.

Re: Why Zuckerberg’s Critics Are Wrong

#43

Post by ant6n »

mangeletti wrote: post #40
ant6n wrote: post #19

Earlier quoted context omitted.

I think it's perfectly reasonable to deduct charitable contributions - up to say, 10K per year. There exist people who sit on huge amounts of unrealized capital gains. If they donate 100M in stock, then they can sell 100M in stock without ever paying any taxes whatsoever.

I agree that setting a limit (rather than getting rid of deductions altogether) could be beneficial, while also eliminating a lot of the abuse, but there is one other thing to consider: If the limit is $10,000, the middle class and wealthy gain the benefits of directing tax dollars while the underclass remain unrepresented. I'm a capitalist through and through (you might guess that based on my ideas herein), but givi…

Well, you could make it 1K$. But I think the issue is to try to make it harder to use donations for tax-avoidance by very rich people; this isn't really about the middle class vs poor people (who tend to pay fewer taxes anyway).

I think another general issue is that many deductible donations go towards organizations that spend very little on their prescribed cause; or aren't non-profits or for the benefit of the public at all.

Re: Why Zuckerberg’s Critics Are Wrong

#44

Post by PhilWright »

I have three problems with the original press release and what it entails.

1 = It comes across as the most epic humble brag of all time. The short form of the release is simply 'Look how great I am for making 10's of billions and how amazing I am for giving most of it to charity. Hell I will only leave a handful of billions for myself to live off.'

2 = He should not be trying to get credit for something he has not actually done yet. You cannot expect credit for giving 10's of billions to charity until you have actually given it to charity. Wait 20 years and then issue a press release showing how much you have actually given away.

3 = Maybe this is more of cultural issue but it is the height of uncouth behaviour to boast about your charity work. The first we hear about your charity work should be many years in the future when it is exposed that you have given billions to good causes. Deriving even the smallest credit for charity giving only diminishes the giving.

Re: Why Zuckerberg’s Critics Are Wrong

#45

Post by Aeolun »

david927 wrote: post #32
tim333 wrote: post #21

I think the critics are mostly, maybe at a subconscious level annoyed by the unfairness of Zuckerberg first having a fortunate upbringing / IQ, then making $45bn before turning 30 and then doing saint like stuff. So they try to knock him down which I guess is understandable, and rationalise it in various not totally logical ways which I guess is human nature.

I'm glad you're making an effort to understand the criticism, but unfortunately you need to spend more time doing so. His company, Facebook, is infamous for not paying taxes. (On profits of three billion last year, it paid six thousand dollars in corporate taxes.) Now, instead of paying taxes on his personal capital gains, he's placing them in an LLC, which he controls, ostensibly to do philanthropic work. He could a…

Well, I'd argue that the problem is not that companies make use of legal loopholes, which after all is perfectly legal, but that the system still hasn't been fixed to stop them from doing that.

It's not like I don't try to pay the least amount of taxes I can every year.

Re: Why Zuckerberg’s Critics Are Wrong

#46

Post by TeMPOraL »

cryoshon wrote: post #14

I'm going to go out on a limb here and say that "philanthrocapitalism" is a term used to obfuscate the issue of billionaires setting up tax havens in the guise of philanthropy. The term implies that philanthropy can be or is a mode of capitalism, whereas in reality it's the opposite because philanthropy deals with altruistic allocation of resources rather than profit-seeking allocation of resources. Let's not use thi…

I agree with your "white hat thinking" that Zuck's initiative may turn out either way, but I'm not so sure about your take on "philanthrocapitalism". Call me naive, but I think that the recent trend among tech billionaires to do philanthropy may actually be genuine.

Look at it from Zuck's or Gates' perspective. They have pretty much all the money in the world, and they know there isn't much to spend it on. They've seen past the usual bullshit like boats and rolexes - they know how it's made, so it's nothing special. Zuck can't use that money to indulge in new toys, because he already has access to the cutting-edge toys and if he wants more, he literally has to fund their creation (which takes time).

OTOH, they all know and see that the world is in deep shit, and they have some power to directly affect it. Not turning to philanthropy in this situation would be something weird. I don't believe that those people are literally made of greedonium, like the common stereotype of rich persons would like to paint them.

Re: Why Zuckerberg’s Critics Are Wrong

#47

Post by the_cat_kittles »

Aeolun wrote: post #45
david927 wrote: post #32

Earlier quoted context omitted.

I'm glad you're making an effort to understand the criticism, but unfortunately you need to spend more time doing so. His company, Facebook, is infamous for not paying taxes. (On profits of three billion last year, it paid six thousand dollars in corporate taxes.) Now, instead of paying taxes on his personal capital gains, he's placing them in an LLC, which he controls, ostensibly to do philanthropic work. He could a…

Well, I'd argue that the problem is not that companies make use of legal loopholes, which after all is perfectly legal, but that the system still hasn't been fixed to stop them from doing that. It's not like I don't try to pay the least amount of taxes I can every year.

that is LOL bad reasoning: take a look at human history and see the lengthy list of atrocious things that have been legal at some point in time.

Re: Why Zuckerberg’s Critics Are Wrong

#48

Post by vezzy-fnord »

ant6n wrote: post #26
thesunny wrote: post #12

The harsh criticism feels unwarranted to me as well. It honestly feels to me like a little bit of misplaced self insecurity. I kind of get it, but considering that there is no evidence of ill will, I get the sense that people are reacting to something other than what's actually happening here (like their dislike for Zuckerberg's fortunes, how he got it, Facebook privacy issues, etc.) To put this into context, if a yo…

The 'charitable work' feels to me like it's primarily an exercise of power. An amount that an individual shouldn't have in the first place. And this particular individual doesn't have a particularly good track record. 1) For example, 'investing' in education may boost the private education system at the further detriment of the public one - long term this could be worse for accessibility of the poor to good education…

I'd rather the public decides which propaganda our young generation's minds get poisoned with rather than a billionaire with uncertain motivations.

How are the public's motivations exempt from uncertainty?

(This is a false dilemma, anyway. The educational prospects of the poor in public schools are already bad, regardless of any action undertaken by Zuckerberg. I also find your implication that private school investment somehow "crowds out" public schools to be highly dubious. The real solution is abandoning the traditional schooling model entirely.)

Re: Why Zuckerberg’s Critics Are Wrong

#49

Post by RyanGWU82 »

david927 wrote: post #32
tim333 wrote: post #21

I think the critics are mostly, maybe at a subconscious level annoyed by the unfairness of Zuckerberg first having a fortunate upbringing / IQ, then making $45bn before turning 30 and then doing saint like stuff. So they try to knock him down which I guess is understandable, and rationalise it in various not totally logical ways which I guess is human nature.

I'm glad you're making an effort to understand the criticism, but unfortunately you need to spend more time doing so. His company, Facebook, is infamous for not paying taxes. (On profits of three billion last year, it paid six thousand dollars in corporate taxes.) Now, instead of paying taxes on his personal capital gains, he's placing them in an LLC, which he controls, ostensibly to do philanthropic work. He could a…

My understanding is that the founding of the Chan Zuckerberg Initiative has no tax implications at all. The only way that tax would be avoided is if the foundation sells some Facebook stock and donates the proceeds to accredited non-profits in the same year. But the exact same deductions would apply if the Chan-Zuckerberg family donated directly.

Re: Why Zuckerberg’s Critics Are Wrong

#50

Post by TeMPOraL »

ant6n wrote: post #26
thesunny wrote: post #12

The harsh criticism feels unwarranted to me as well. It honestly feels to me like a little bit of misplaced self insecurity. I kind of get it, but considering that there is no evidence of ill will, I get the sense that people are reacting to something other than what's actually happening here (like their dislike for Zuckerberg's fortunes, how he got it, Facebook privacy issues, etc.) To put this into context, if a yo…

The 'charitable work' feels to me like it's primarily an exercise of power. An amount that an individual shouldn't have in the first place. And this particular individual doesn't have a particularly good track record. 1) For example, 'investing' in education may boost the private education system at the further detriment of the public one - long term this could be worse for accessibility of the poor to good education…

> The 'charitable work' feels to me like it's primarily an exercise of power.

It might feel that way. What Gates Foundation does, or what Elon Musk does (not charity, but hitting the market with a stick until it gives up and moves where he wants it to), feels like an exercise of power. It feels undemocratic. It feels good.

There are problems in this world - some of the biggest and most important problems, like climate change, energy crisis, poverty or education, are of this type - for which both democratic governments and free markets fail spectacularly. Making things worse is usually more profitable than making them better, so that's what businesses do. And democracies spend endless amounts of time and resources on constantly talking and doing nothing. I'm very happy that there are people who can single-handedly do something about problems that lie on the other side of coordination trap.

And yes, I'm aware that this type of power can backfire and the next rich person may use it for evil. But when the alternative is to continue doing nothing (or making things worse), the risk can be worth it.

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