You hear a lot about how “the rich” are using charities to effectively reduce their tax to minimal amounts, among other methods.
On the face of it without digging, it obviously makes people angry and detest the rich. But scratching beneath the surface, I’m not quite sure how exactly they would achieve this? In order to claim the tax back from money donated, you still have to… donate money? Which would still equal more than the money claimed back from tax.
So unless they are actually doing something illegal and funneling money through a charity, claiming tax, and then using that money from the charity to fund purchases not related to the charities mission, how exactly is it benefiting the donor (financially)?
In: Economics
Own nothing, control everything. The rich often set up private foundations with millions of dollars. They and their families can work for these foundations often at a very good salary. The money is passed to the foundation tax free. The foundation can do something nebulous and difficult to say if anything was accomplished like : raising awareness about something. The foundation has to payout 5 percent of it’s net worth every year including what it costs to administer the foundation but the fund is often earning double of what it’s paying out and so continues to grow. But you can’t payout too much to yourself or relatives or the IRS will come knocking. And you can’t donate to politicians. But you can hire their kids or spouse and transfer money to the politician’s foundation. It’s a big club but you ain’t in it.
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