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
You’ll need to acknowledge that there are gradations between “benevolently giving charity”, and “doing illegal things with your charity”.
Example: you can give money to a private school as charity. Maybe that school is really small. The only kids in it are your own kids. Still (probably) legal.
Example: you can give money to a charity. And that charity can (and should pay) its employees. Maybe the charity is run by your son. People who run organizations get paid well, so he should be paid well. Still (probably) legal.
If you think we should make either of these legal, I don’t disagree with you, but also remember to walk them back a little towards the benevolent side: what if your kids are 50%, or 10%, of the students in a school? What if your son isn’t the CEO, but some other lower role in this charity?
And, to be honest, we all do this too. I give money to non-profits that I then benefit from: synagogues I pray in, sports leagues I play in, political movements that would benefit me financially if it were successful. It’s not fraud to give charity to things that benefit me, and to avoid taxes through it. But it’s something we should be aware is happening when the richest Americans do it to avoid keeping our government afloat.
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