Jeff Bezos, the billionaire founder of Amazon, has asked on Twitter for advice about the use of his fortune for philanthropy. My advice is that Mr. Bezos should pay some tax.
Contemporary attention to philanthropy is largely attributable to the admirable work of Warren Buffett and Bill Gates, Jr. Through their efforts, The Giving Pledge, Buffett and Gates have commendably encouraged rich individuals in the US and abroad to devote much of their wealth to charity. Buffett and Gates themselves have been generous with their own personal fortunes.
But, as I have discussed in the Florida Tax Review there is a downside to the Buffett-Gates Giving Pledge: Under current law, the federal Treasury loses substantial revenue when appreciated stock is donated by a US citizen to charity. When Buffett’s Berkshire shares, Gates’s Microsoft stock or Bezos’s Amazon shares are transferred to charity, and the federal Treasury loses the income tax on the capital gain which would have been realized had that stock been sold. Moreover, such gifts of appreciated stock to charity remove these assets from the coverage of the federal estate tax. The upshot is that the federal Treasury receives neither income tax nor transfer taxes when billionaires like Buffett, Gates, or Bezos contribute their appreciated stock to charity, stock on which these business founders have paid no federal income tax.
Besides their efforts for charity, Buffett and Gates have been outspoken in calling for higher income taxes on the rich (the so-called “Buffett Rule”) and for the preservation of the federal estate tax. Notwithstanding their advocacy of higher taxes for the rich, Buffett and Gates conduct their own affairs to avoid any federal taxation on their contributions of their appreciated shares to charity. This is perfectly legal but hard to square with the Buffett-Gates program of taxing the affluent.
There is, in short, considerable tension between the Buffett-Gates project to protect the federal fisc and the Buffett-Gates effort to encourage philanthropy as that effort has in practice been implemented.
Mr. Bezos can now set an instructive example. He can sell Amazon shares, pay tax, and then contribute the net after-tax proceeds to charity. This would produce less for charity but more for the federal fisc. In addition or instead, Mr. Bezos could make a voluntary contribution to the federal Treasury to compensate for some or all of the income, estate, and gift taxes avoided by his contributions to charity.
Warren Buffett has eloquently observed that large fortunes such as his result not just from the skill and work of entrepreneurs like Gates and Bezos, but also from the taxpayer-provided public services which support these entrepreneurial efforts. Mr. Bezos could open a new chapter in charitable giving by acknowledging the role of public overheads in facilitating his success and by paying some tax on the gains he will donate to charity.
Featured image credit: Amazon’s front door by Robert Scoble. CC-BY-2.0 via Flickr.
Mr Bezos please contribute torwards a noble cause of reducing pollution on our planet by supporting individials or groups of people who endavour to plant forests especially in Uganda.
Currently am spear heading that cause together with a group of 20 youth and it’s promising.
Regards Albert M K.
This article is stupid. Either give directly to charity where 100% of the money goes to good causes or firstly give a load to the US treasury and contribute towards a bloated defence spend killing more people.
Bezos has done more good for the average American than most people living today. Buffett is your typical ROBBER BARON of our generation by extracting wealth from the average American.
Philip Ingerson
How about Bezos stops treating workers like slaves, making them overheat and hiring ambulances to take them to the hospital, and stops paying poverty/starvation wages. He’s a scumbag.