TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Sunday, November 26, 2017

George Soros’s $18 Billion Tax Shelter

Open SocietyWall Street Journal op-ed:  George Soros’s $18 Billion Tax Shelter, by Stephen Moore (Freedom Works):

Congress is still scrambling to find ways to pay for its tax cut, so perhaps it should pay closer attention to last month’s news that George Soros had transferred $18 billion of his fortune to a private charity that he controls. There it will be sheltered from the Internal Revenue Service forever. This may be the single biggest tax dodge in U.S. history, yet no one on the right or left seems to have raised an eyebrow.

True tax reform is predicated on the principle that all income should be taxed at a low rate once, and only once. But much of the wealth that Mr. Soros spent years moving into his Open Society Foundations will never be taxed. A gift of billions of dollars of appreciated stock escapes any capital gains tax, and the estate tax as well. So Mr. Soros can donate appreciated stock that Open Society Foundations can liquidate without the government ever taking a cut.

There’s more. When a person donates untaxed, appreciated assets to a private foundation, he may also deduct up to 20% of its market value on his personal return, carrying forward this deduction for five years. This double write-off may be the sweetest deal in the tax code.

The donors also can retain control of the money within the private foundation for years or even decades before it is disbursed. Since the foundation can employ family members at six-figure salaries for life to “administer” it, the umbilical cord to the donor never has to be cut.

Congress should stop ignoring this tax-avoidance scheme. The super rich have already poured hundreds of billions into private foundations, but the figure could soon be in the trillions. Mark Zuckerberg has pledged to give away 99% of his Facebook shares, currently estimated to be worth somewhere around $70 billion, and much of it will go to a foundation his family controls. Bill Gates and Warren Buffett have each put roughly $30 billion tax-free into the Bill and Melinda Gates Foundation. This has left the foundation so flush that it spent $500 million on a 12-acre, 900,000-square-foot office complex in Seattle for its 1,500 employees. This is philanthropy? ...

The question is whether a tax code that encourages dynastic family foundations is good for America. If Congress stopped letting billionaires pour money tax free into the foundation-industrial complex, it would go a long way toward lowering rates and making the tax code fairer for everyone. This would help the economy grow faster, which is the best way to help those in need.

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Comments

George Soros is not the softest touch in the world, but he gets blamed for a lot of things that aren't his fault. I'd be careful about stories that ascribe excessive evils to him.

Posted by: mike livingston | Nov 27, 2017 4:18:16 AM

mike,

How about just ascribing good old fashioned money-grubbing hypocrisy?

: )

Posted by: MM | Nov 27, 2017 7:36:24 PM

I'm amazed at those who support the estate tax and yet have no problem with the uber wealthy stuffing jillions into private foundations. Does anyone seriously believe Buffet and Gates will be paying any estate tax? I have long maintained the estate tax is an ignorance tax.


Posted by: Dale Spradling | Nov 27, 2017 7:54:57 PM

I would be curious to know if the WSJ gets an equivalent set of the vapors over the lack of step up basis reform with the repeal of the estate tax....?

Posted by: Elaine Wilson | Nov 28, 2017 6:37:07 AM