Oxford University Press Blog: My Advice to Mr. Bezos: Pay Some Tax, by Edward Zelinsky (Cardozo):
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 [Why the Buffett-Gates Giving Pledge Requires Limitation of the Estate Tax Charitable Deduction, 16 Fla. Tax Rev. 393 (2014)], 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.