Mark Zuckerberg Takes on Critics of His $45 Billion Giveaway

4 Dec 2015 | Author: | No comments yet »

Facebook’s Zuckerberg: No tax benefit from philanthropic initiative.

Facebook Chief Executive Mark Zuckerberg said on Thursday he and his wife would receive no tax benefit from setting up their new philanthropic endeavour as a limited liability company and hinted at the types of efforts it would support.After new parents Mark Zuckerberg and Priscilla Chan revealed their plans this week to give away 99 percent of their Facebook shares, a firestorm of controversy erupted. The 32-year-old Facebook boss, who became a parent for the first time with the birth of daughter Max, wrote a 2200-word Facebook letter to his newborn on Tuesday, welcoming her into the world. To show his commitment to his daughter’s generation, Zuckerberg announced the creation of a new company – not a charitable trust, but one which would explicitly invest in socially impactful issues – where he will spend 99pc of his Facebook shares – the equivalent of $45bn over a lifetime.

Their recent donations include $20 million to EducationSuperHighway, which helps connect classrooms to the Internet, and a new acute care and trauma center at San Francisco General Hospital, where Chan works as a paediatrician. Others have suggested that the Initiative is a giant tax avoidance scheme, specifying that by gifting shares rather than cash, Zuckerberg avoids paying higher costs in capital gains tax.

The media response has spanned the gamut of reactions from slightly patronising to useful advice on how Zuckerberg should spend the money for maximum impact, all the way to cynical and reasoned debates on whether the money is truly charitable, and/or just a smart way for the Zuckerberg-Chan family to avail of various tax benefits by donating its sizeable wealth to its own Foundation. And just like everyone else, we will pay capital gains taxes when our shares are sold by the LLC.” Tougher to address was criticism that Zuckerberg was being wasteful with the money — specifically, that Facebook’s billions would be used to further his own Silicon Valley-shaped worldview rather than donated to a charity that already has operations in place in the developing world. Responding to a comment he would pay “ZERO tax” for the initiative’s investments that was made in reply to his Facebook post on Thursday, Zuckerberg denied that was the case.

At the moment of its foundation, The Chan Zuckerberg Initiative’s intentions were woolly — advancing humanity and promoting equality without a specific roadmap for either goal — but they’re already starting to take shape. Zuckerberg used his most recent post to call out initial areas of focus for the Initiative, choosing “personalized learning, curing disease, connecting people, and building strong communities” as places it will first spend its money. Quipped Esquire’s Stephen Marche: “These goals coincide with literally every political ideology from libertarianism to Communism.” In an apparent effort to mitigate some of these concerns, Zuckerberg took to Facebook on Thursday to elaborate upon his original announcement. While the world’s richest men (they were all men) in the 20th century all made their money in the gritty, cutthroat worlds of oil and steel, the billionaires of today have built their industry on the bedrock of the internet. It’s clear tech founders, in particular those in Silicon Valley, are self-made – they have amassed large fortunes mostly from inventing everything from search engines, to social networks and strap-on cameras.

As the New Yorker’s John Cassidy noted on Wednesday, Zuckerberg’s decision to spend his money in this way will still have ramifications on the average taxpayer, despite the structuring of his organization as an LLC. The rising wealth has led to the inevitable growth of a bubble subculture in the Valley, with backlash against arrogant, clichéd startup-types, who are mockingly referred to as “Glassholes” in reference to the now-defunct Google Glass. But while some technology entrepreneurs may be getting rich inventing lazier ways of doing your laundry or apps that objectify women, those who have garnered the most success seemingly want to invest in a better future. According to the Chronicle of Philanthropy’s Philanthropy 50 list, which compiles data on America’s biggest donors each year, 10 of the top 20 biggest donors of 2014 are from the technology world. The obvious ones are Bill and Melinda Gates, who got the top spot overall having donated nearly $2bn to charitable causes ranging from education in the United States to healthcare in thee developing world, through their eponymous foundation.

But there were several new, unexpected entrants too – Whatsapp founder Jan Koum, 39, gave 555 million dollars to the Silicon Valley Community Foundation, ranking him number 4 on the list. Google’s Sergey Brin who comes in at number 9, donated his $382m partly to Ashoka, a nonprofit that brings together social entrepreneurs to work on education, the environment, and women’s issues. The reason that tech founders are giving generously could be a reflection of the current financial environment – it’s never been easier to raise investment, valuations are peaking, unicorns and even decacorns – companies valued at ten billion dollars – abound.

Mr Koum said he wished to “set the record straight” on the nature of the partnership with Facebook Photo: Eyevine Sean Parker, for instance, has set up an allergy research centre at Stanford University with part of his endowment. The reason, he says, is partly because he suffers from anaphylactic allergies himself and wants to find a cure so his children won’t suffer the same crippling, life-threatening symptoms. Only two decades later, the memories have clearly not faded: just last year, he signed off the $19 billion sale of his company to Facebook at the very same welfare office. Zuckerberg’s previous donation of $100m to public schools in New Jersey is proof of what happens when money is mismanaged – it can do more harm than good. But ultimately, tech philanthropists are earmarking their money for our generation’s most gnarly social problems – healthcare, poverty, education, access to internet for all.

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