(Mackenzie Marco / Unsplash)
The spotlight is on how rich and powerful their wealth is, and fear is growing among philanthropists.
Wealthy Americans have long sought to use charitable donations to reduce their tax burden.However “Pandora Paper” report published on Sunday by an international consortium of investigative journalistsReveals that world leaders and millionaires are using shell companies and offshore accounts that are considered legal to hide trillions of dollars out of government reach Did.
One operation described in the report, “Dynasty Trust,” can exist permanently in states like South Dakota. These trusts can be used by Americans to legally protect themselves from property taxes and other taxes, thereby removing a major incentive for charitable donations.
When the wealth of an American individual or couple exceeds a threshold ($ 11.7 million or $ 23.4 million, respectively), the value of each dollar above that level, once bequeathed, is up to 40% federal heritage per generation. It is subject to tax.
However, carefully crafted dynasty trust helps posterity avoid those taxes. Also, the longer the trust, the longer the user can avoid taxes, and the less financial incentives to donate to charity.
Experts say that some Americans can also legally circumvent the state’s income tax on the income generated by their assets by setting up a trust in a state that does not impose income tax. One of them is South Dakota. South Dakota does not have its own real estate, capital gains, or inheritance taxes, making it a particularly attractive destination for parking wealth.
Professor Rey Madov of Boston College Law School, who teaches philanthropy, said: And taxes. “The impact on the philanthropic sector is probably already underway, but will grow over time.”
After all, tax policy consistently affects charitable donations. The Treasury reported that charitable donations in 2018 fell 1.3% year-on-year after President Donald Trump pushed for tax law revisions through Congress in 2017. Generally, such donations tend to grow at about the same pace as gross domestic product, which rose 5.2% that year.
As the Biden administration is pushing for a tax increase plan for wealthy Americans, it incorporates into its estimates that many people affected by the tax increase will donate more to charity to reduce their tax burden. .. But for many wealthy individuals, trusts such as those outlined in the Pandora Paper will reduce their tax burden without charitable donations.
The trust allows one grantor to transfer the asset to the trustee, who manages the asset and sends it to a third beneficiary. However, in states such as South Dakota, Alaska, and Nevada, the person who transfers the asset can name himself the beneficiary of the trust. Mitchell Gunns, a professor at the University of Hofstra, who specializes in tax law, said these so-called “self-settlement trusts” could further reduce the tax burden by protecting assets from creditors and moving assets from taxable real estate. Stated.
South Dakota has also introduced strict privacy laws to keep trust out of the public eye. This is a feature that wealth advisors use to appeal to potential clients with multi-generational wealth growth. State trust assets have skyrocketed to $ 360 billion in the last decade alone, according to research reports.
It is difficult for charities to know what the long-term consequences of a trust will be. Many charitable and lobbying officials declined to comment on the impact of the Pandora Paper revelation on charitable donations. Because there is a lack of data on how widespread the use of these tax havens is.
However, some studies suggest that there may be some impact. According to a recent survey by consulting firm CCS Fundraising, 25% of donors cite tax credits as a motivation for charitable donations. A collaborative study between the Bank of America and the Indian University Lilly Family School of Philanthropy found that 22% of the wealthy donors surveyed would reduce their donations if the charitable tax credits were abolished. According to the same survey, 51% of wealthy donors may donate to charities for tax incentives.
Patrick Rooney, a professor of economics and philanthropy at Indiana University, said he believed that dynasty trusts would undermine philanthropic donations. Removing the incentives for charitable donations essentially raises the price of donations, he said. Meanwhile, Rooney pointed out that tax cuts could drive donors to contribute more to the causes of interest in their terms.
“Most high net worth individuals are donors to different types of charities for different reasons,” he said. “So I think some of these people have a philanthropic urge despite trying to evade taxes, but I don’t know for a while.”
Chuck Collins, director of the Progressive Think Tank Policy Institute’s Inequality and Common Goods Program, said many wealthy Americans consider their philanthropy part of their wealth conservation skills. Still, he said, some charitable people may still want to avoid taxes.
“I think it’s probably a pretty big category (of people),” he said.
Increasing Concerns About Charities: Tax Havens for the Rich | Chicago News
Source link Increasing Concerns About Charities: Tax Havens for the Rich | Chicago News
The post Increasing Concerns About Charities: Tax Havens for the Rich | Chicago News appeared first on Illinois News Today.
No comments:
Post a Comment