Archive for the ‘Charity’ Category

Buffett, Romney & the Give Back to Society Rate

January 30, 2012

The cameo by Buffett’s secretary at last night’s SOTU address, and Mitt’s released tax returns have re-elevated the issue “coddling the rich” with low tax rates (compared to their secretaries).

Last fall, when we dissected Buffett’s taxes, we coined a  measure: the GBSR™ – “Give Back to Society Rate

We defined the GBSR™ as the sum of taxes paid plus charitable contributions – since those are all money that’s supposed to be going to the common good, albeit administered by different organizations – divided by AGI.

We crunched the numbers and concluded that Buffett pays about $7 million in Federal taxes, about $3 million in state taxes, and about $20 million to charities … for a total of $30 million … which dived by his $63 million AGI … gives a GBSR™ of almost 50% (47.6% to be precise).

We concluded that Buffett may not be the piker that he claims to be.  And, maybe he should stop causing trouble for other folks by constantly whining about the tax code.

In Romney’s case, his release says that he made $21 million … paid $3 million in taxes … and donated $3.7 million to charities.  So, his tax rate may sound meager @ 14%, but his GBSR™ is almost 32% – and that’s not counting state & local income taxes.  My bet: add S&L taxes in and Mitt ‘s GBSR™ is way over 40%, too.

So, it just may be that the tax code is leading fat cats to do the right thing – it’s just that they’re giving much of their dough to private charities instead of the Feds.

Do you blame them?

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Here’s the original HomaFIles post:

Squeezing Buffett’s numbers … Part 5 (and done !)
Homa Files 10/21/2011

OK, today should about do it.

After a recap, I’ll drop my conclusion on you … my very surprising conclusion

First. a recap to get everybody on the same page.

In Part 1, we looked hard at Buffett’s effective income tax rate (17.4%), and showed how he could get to that low rate by offsetting practically all of his ordinary income with $23 million in deductions.

This conclusion debunks the popular pundit point that he gets to the rate by having practically all of his income in capital gains and dividends.

In Part 2, we showed that about $20 million of the deductions are probably charitable contributions – a device that rich folks use to (1) do good things and (2) to manage down their tax liabilities.

Better to give to a cause that you believe in, right? Why give it to the government and have it waste the money?

In Part 3, we agreed that Buffett’s tax rate as a percentage of his taxable income is probably less than his secretary’s – partially due to his capital gains being taxed at a comparatively low rate, but mostly because he shelters his ordinary income with charitable deductions.

And, we showed how ordinary earners can get to a rate lower than Warren’s … just by donating a huge chunk of their income to charity. Not realistic, but mathematically possible.

In Part 4, we showed that Buffett’s tax rate as a percentage of AGI is only 11% …. about half of the estimated rate for our hypothetical secretary surrogates.

image

Now, my first reaction when I stared at the taxes to AGI rate was “Wow, Buffett’s right – he’s nothing but a coddled piker.”

But now, I’m not so sure.

On one hand, his paying a rate (to taxable income) that’s 5 points less than his secretary doesn’t seem fair. Especially since he gets to the rate by exploiting some dreaded tax loopholes, aka. “deductions”.

The situation seems even worse when you consider his taxes to AGI rate – a mere 11% – less than half of his secretary’s rate (I suspect).

Gotta jack up taxes, right?

Not so fast.

Let’s construct another measure: the GBSR™ – “Give Back to Society Rate

Since I’m coining the measure, I’ll define the GBSR™ as the sum of taxes paid plus charitable contributions – since those are all money that’s supposed to be going to the common good, albeit administered by different organizations – divided by AGI.

OK, so what’s Buffett’s GBSR?

Well, based on my estimates, Buffett pays about $7 million in Federal taxes, about $3 million in state taxes, and about $20 million to charities … for a total of $30 million … which dived by his $63 million AGI … gives a GBSR™ rate of almost 50% (47.6% to be precise).

Now, let’s pretend that Buffett’s secretary profiles like our $100,000 ordinary earner above. Her charitable deductions would be at most $5,700. Otherwise she wouldn’t be taking the standard deduction, she’d itemize.

So, her GBSR™ @ $100,000 AGI is 27.5% ($5,700 + $21,709 = 27,409 / $100,0000 = 27.5%).

That means that Buffett’s GBSR™ is almost twice his secretary’s.

Hmmm.

Maybe he’s not such a bad guy and I should stop ranting about him.

And, maybe he should stop causing trouble for other folks by constantly whining about the tax code.

It just may be that the tax code is leading to the right answer.

Just have to look around the trees to see the forest.

AMEN

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Want to protest big government? … Then give to charities.

January 12, 2011

Punch line: Charitable gifts are a cheerful protest vote against the growing state.

Translation: since charitable donations are tax deductible, folks can divert money from the Fed coffers to causes of their choosing.

It’s a win-win-win.  Charities get money to operate, the Feds get less money to waste, and the contributors can feel that they did  good in two ways – by supporting worthwhile causes and constraining our free-spending Congress.

Explains why Buffett pledges his dough to Gates’ Foundation and why, generally, conservatives give way more to charity than liberals.

From the WSJ …

Your intuition might tell you that people who favor government redistribution of wealth care most about the less fortunate and would give more to charity.

But the data tell a different story.

A large, nonpartisan survey asked people about both redistributive beliefs and charitable giving. It found that those who were against higher levels of government redistribution of wealth privately gave four times as much money, on average, as people who were in favor of redistribution. This is not all church-related giving; they also gave about 3.5 times as much to nonreligious causes. Anti-redistributionists gave more even after correcting for differences in income, age, religion and education.

Obviously, not all charity has ideological connotations — nor should it.

But for many, especially at this time of year, giving is a cheerful, productive protest vote against the growing state.

WSJ, Tea Partiers and the Spirit of Giving, Dec. 24, 2010
 
http://online.wsj.com/article/SB10001424052748704774604576036010174911064.html?mod=WSJ_newsreel_opinion

Billionaires pledge charitable deductions … to do good and duck taxes.

December 20, 2010

Last week, 17 more billionaires signed on to the Giving Pledge and declared their intention to give away to charitable organizations at least 50 percent of their wealth. The initiative is being spearheaded by Buffett and Gates.

To call me cynical about the pledge would be an understatement.

I see it as a clever way for them to dodge estate taxes taxes (while whining about how they are undertaxed) and maintain their power … even from the grave.

I’d like to see how much money they’d throw in the pot if they had to do it with after-tax dollars.  That would be a nice sincerity test.

I was surprised to see the Huffington Post raise some issues about the billionaires’ pledge …

Huff Post, Why We Should Dial Down Our Enthusiasm for the Giving Pledge, December 15, 2010

Last week, 17 more billionaires signed on to the Giving Pledge and declared their intention to give away to charitable organizations at least 50 percent of their wealth. The initiative is being spearheaded by Warren Buffett and Bill and Melinda Gates.

I applaud the Gates family and Mr. Buffett for being willing to challenge their peers and to lead by example. Their effort will surely lead to an increase in giving among billionaires and others. I do, however, have some concerns.

There are three important reasons to keep our enthusiasm for the Giving Pledge in check.

First, the pledge is likely to have an extremely small impact on total giving, especially in the first few years. The problem is, the money is going to trickle out over a very long period of time, and it will represent only a very small upward tick in total charitable giving. Billionaires who take the pledge commit to giving half their wealth to charity at some point during their lifetimes, or at their deaths. Some people on the list are quite elderly, but others are likely to spread their giving out over the next 50 years.

My guess is that most of the money will wind up in university or foundation endowments, with only about 5 percent of the asset base getting spent on charitable purposes each year in perpetuity. Clearly, the Giving Pledge will not be a major factor in sparking a much hoped-for rebound from the drop in giving that has decimated many nonprofits these last two years.

Second, little of the money is likely to benefit the most under-served populations. And third, giving by billionaires has typically been limited in its effectiveness and has dangerous implications for democratic decision-making.

Wealthy donors don’t tend to prioritize lower-income communities, communities of color or other marginalized groups as beneficiaries of their giving. Instead, they tend to give to nonprofits that they patronize, such as cultural institutions and their alma maters.

Wealthy donors give to places “where they spend their leisure time” and that only 10 percent of charitable contributions actually benefit the poor. 

Third, giving by billionaireshas dangerous implications for democratic decision-making.

http://www.huffingtonpost.com/aaron-dorfman/the-giving-pledge_b_796159.html

English translation of “dangerous implications for democratic decision-making”: if people start making personal decisions about where their money should be directed -– partially subsidized by tax advantages—then the Feds have less money at their disposal to direct as they (the Feds) see fit.

Oh my …

Charity Opportunity … the Juvenile Diabetes Research Foundation

March 30, 2010

My son Scott has been named a team captain for Jones Lang LaSalles’s charity walk to benefit the Juvenile Diabetes Research Foundation.

I think JDRF is a good cause, and I think that Scott is a good guy.

If you’d like to support the organization — and/or the man —  here’s the link to donate:

http://walk.jdrf.org/walker.cfm?id=87650991

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JDRF is a 501c3 organization and all donations are tax deductible

Juvenile Diabetes Research Foundation
Capitol Chapter
1400 K St NW
Suite 725
Washington, DC 20005

Tax ID: EIN#23-1907729