Pay Dirt: I Make $700,000 a Year, and I Pay a Lot in Taxes. Must I Also Donate to Charity?

[jadelennox]

Dear Pay Dirt,

What’s the appropriate amount to give to charity for my income level? I make around $700,000 a year, and give around $10,000 a year to charity, which seems measly for my income level. Some days I think this is absurdly low—with current levels of inequality I should be giving half of my after-tax income to charity. Other days I think, hell, my effective tax rate is about 50%. Do I really owe society more?

—Am I A Scrooge?

Dear Scrooge,

Acknowledging inequality says a lot about you, so no, I don’t think you’re a total scrooge. Honestly, I would get angry paying that much in taxes myself. And you may have other situations where you’re being generous—supporting family members who have less, for example—that aren’t strictly “charity,” as most would understand it.

People’s opinions may differ, but I don’t think you should have to give to a charitable cause just in order to feel better about your high income. Instead, acknowledge your high income as a gift and find a cause you feel passionate about. Donating just because is different than donating to a cause that keeps you up at night. You may find that, as you become more passionate about the work being done, you may want to donate more, whether that be dollars or time. You could also look into making a recurring donation, like setting up a scholarship fund at a local non-profit. You’d be making a difference while changing someone’s future.

Source

Comments

[minoanmiss]

If I earned that much I would give a lot more to charity -- one of the things that my job finances is my ability to support worthy causes. But I don't know if I can say any given person owes a given amount. (that said, suck up the taxes, they used to be way more.)

[sporky_rat]

Might not be American?

[jadelennox]

LW, you asked what you should do, which means you want a moral judgement, not a legal one. So yes, you should, and if you don't and you don't have extenuating circumstances ("I don't like a graduated income tax" is not an extenuating circumstance), you are morally obliged to give substantially more of your money away.

Who gets to make that moral judgement? We do, because you publicly wrote to an advice columnist and asked for a moral judgement. We are the readers, and I find you to be an immoral and selfish person who wants someone to hold your hand and tell you that you're a good girl.

Look, LW, I consider myself amazingly well off, and yet, while I make so much less than you I can't comprehend having as much money as you do, I give more than you do to charity in raw dollar amounts. So suck it up and stop being selfish.

Pick a percentage. Pick a high percentage. Then just give that every year. It's a formula that has worked for me in years when I was unemployed (10% x 0 dollars...) and in years when I got surprise bonuses. Pick something you care about. You don't say you're spending the money on long term care or something, so... what? What the fuck are you doing with $700K? You can't take it with you, you know that, right?

Study: Poor Are More Charitable Than The Wealthy

[adrian_turtle]

This laser focus on the distinction between the taxes people "have to" pay, as legal obligations, and the charity that good people "should" give, is what seems missing from the original response. (It kinda touched on it. But it should have hit it hard.)

Yeah, absolutely. LW should pick a cause they like. $100,000 of tax money to the government includes a lot of money to build prisons and militarize the cops. Many people find it more satisfying, and thus easier, to give it to the local food bank. Or dog rescue. Or fund to provide school supplies for poor kids.

[melannen]

LW, the more you have to give away, the harder it is to give. And not just out of some kind of moral failure of humans - it's easier to toss $10 at someone (even if that's a days wage) than $100,000 just because there are a lot more options for people to do real damage with the $100,000 if you choose poorly who to give it to. So I don't judge people who give less than they might out of just choice paralysis (that is also me.)

There are classes available on charitable giving for high-income people and people who have just come into money, how much to give, how to decide where to give, how to structure your giving. You're probably on the lower end of what they're aimed at, but they would probably be useful in helping you feel more confident about how to use your income.

(Also, if you give over half of it to 501(c)3s you'll be paying a lot less in income tax. So there's that - in some ways for people in your income bracket, giving to charity is a way to choose how your money will be used for the greater good yourself, rather than letting the government decide what the greater good is. If you're happy letting the government decide, though, just keep paying your taxes!)

ETA: I'm going to also gently suggest you find a way to get involved with local charitable groups other than by giving them money. With that kind of income, lots of places will be happy to invite you to their functions or even their honorary boards, and as you get to know the actual people involved in the work in your area, it will get easier and easier to decide what to do with your money (they will ask you for it, and you will have a deep understanding of why they are asking.)

[jadelennox]

With that kind of income, lots of places will be happy to invite you to their functions or even their honorary boards

In theory, I agree, but in practice... If you're a rich person who resents taxes and wants to be told you don't have to give away more than 1.5% of your income, I don't actually want you sitting on any charitable boards. Those end up being the people who are very excited by the annual gala and who don't want your homelessness charity to support any movement to decarceralize, you know? I mean, if we're lucky, LW will get excited by supporting the museum or the theatre -- they always need money and aren't harmed by people like LW. Or, heck, the OTW, probably. But I don't actually want someone who feels like LW vying for a spot at the affordable housing charity.

[melannen]

I mean, yeah, but I also think some people here are being a little harsh on LW - they say in the letter that (sometimes) they agree they should be giving a lot more away, they aren't actually in the top tier of asshole rich people (and when you know you should be giving more away but you don't really know how or where so you don't, it's easy to come up with reasons why.) $700 000 and don't know how to handle that money kind of reads to me like someone who didn't grow up that rich but just landed a really overpaid job, and it does take awhile to figure it out.

I would rather they annoy the people at the homeless charity while giving them money and learning from them than give the money to the first dominionist megachurch pastor who asks. But this goes back to the "giving away large amounts of money is hard" point I was making - having large amounts of money to give away doesn't actually come with the ability to know the best way to do it, and saying they should give it away but then nitpicking every opinion they express about it doesn't help. At that point they might as *well* just give some extra to the government. You gotta learn who needs help somehow; getting to know the people who run the homeless charity is as good a way as any, and the fundraising people at the homeless charity ought to have some expertise on handholding and/or disposing of clueless rich people with bad politics. (They also all know each other, and it hooks you into a network of a) local charities who need money and b) other charitable rich people who can mentor you.)

[jadelennox]

I'm pretty sure the primary person being harsh here is me, tbh. I feel like I'm being so much meaner to LW than anyone else that I've gone back and reread the letter a few times wondering why I'm so out of sync. But that "Do I really owe society more?" really, really aggravated me.

(I am also a person who is a few income tiers out of how I was raised; in my earliest memories my family is aspirational rising working class, and by the time I left home we were would-be-comfortably-upper-middle-if-not-for-expensive-disabilities-and-a-bankruptcy, and now I'm a Gen X techie in a relationship with a Gen X techie. So it's possible that my utter lack of sympathy for LW is that particular node of "ffs, I've figured it out, it wasn't that hard", but, like. I grew up in a home where putting some coins in the box was a required part of Friday night religious practice, so I had to figure out how to give away a lot of money, but I never had to figure out for myself that I was obligated to so at all.)

I mean I also feel pretty strongly that the actual problem here is the same as tipping when we know the tipped wage is shit: private charity can't make up for a lack of government services. Anand Giradharas is right: private philanthropy is one of the many ways the economic elites (not one percenters like LW, but .01%-ers) control and manipulate the world, and the actual solution is to tax the shit out of me, and LW, and definitely the .01%-ers, and then actually provide the government services. It's been heartbreaking to watch the growth of the Trussell Trust in the UK after 12 years of Tories and 13 years of New Labour before them. (The Trust formed the same year Blair was elected. 🤔) It's good to watch people in the UK be charitable, but also, WTF, watching a country that used to have very low food insecurity levels, even during some pretty bad downturns, turn into the UK today is just crushing.

[melannen]

Ah, you're not the only one, but I'm probably leaning kinder than most people, because while I make about 5% of this person's income I do come from a family of the kind of accidental millionaires I described below which makes me constantly feel like I'm not giving enough because familial wealth and being raised to just chuck all your money into investments and forget about it keeps expenses and debt so low. I probably am giving over 10% - it's the single biggest category in my recurring bills, other than the rent I give Mom which she gives right to charity - but I'm still saving way more than most people in my place, and I do have a ton of choice paralysis about it.

I think we both are basically agreed here - ideally the answer is LW doesn't have to give a huge percent to charity, because they *are* giving so much in taxes, and the taxes are being spent on actually helping people, and if they want to give above that it's just because it brings joy. But alas that's not the world we live in.

But I guess because of that their "I'm already giving half my income away, isn't that enough?" didn't strike me quite as badly as it did some people because I think if all of the 1% learned to think of paying income taxes as putting their money in trust for the aid of society as a whole and that being a good thing to do - which the person does seem to do! - we would live in a much better world (with a much healthier tax base.) Like if even one billionaire sat down and thought, you know what, maybe instead of micromanaging my charitable trust I will just ask my accountants to try to max my taxes instead of mimimizing them and give money to politicians who want to bring back Reagan-era taxes, that's a good outcome.

(And also, this person isn't having trouble figuring out that they're obligated to give at all; they're giving $10,000 a year, which isn't pennies, especially if you grew up in a situation where that's a year's rent, and it still takes making a decision that you're going to give.)

[jadelennox]

I think we both are basically agreed here

Yeah, we're interpreting LW with different levels of charity (heh) but we agree about the systemic and individual issues.

if all of the 1% learned to think of paying income taxes as putting their money in trust for the aid of society as a whole and that being a good thing to do - which the person does seem to do!

Valid, I suppose. While people in some other threads are questioning the person's math, someone with $700K actually will get to 44% if you include state, federal, and fica -- but if someone is making that amount of money and hasn't figured out some rich person method of making it mostly non-taxable, that's an actively good. A normal selfish slimeball at that wealth level could probably finagle it differently. Of course we don't know how this person is managing their investments and what taxes they're paying there, but we don't even know what they have, just income.

Like if even one billionaire sat down and thought, you know what, maybe instead of micromanaging my charitable trust I will just ask my accountants to try to max my taxes instead of mimimizing them and give money to politicians who want to bring back Reagan-era taxes, that's a good outcome.

Hell, yeah. If you haven't read Giridharadas's Winners Take All about billionaire philanthropy I think you'd find it interesting. I take Giridharadas with a big old barrel of "well, you worked at McKinsey before you started bashing McKinsey" salt, but that also gives him a really interesting lens. If even one billionaire wanted to do real altruism, that's a good outcome. (Now of course I'm thinking about Effective Altruism and I'm suddenly furious, because the idea of data-driven philanthropy had so much promise! And then it turned out everyone who was into it was just mentally masturbating about the AI singularity and refused to actually pay attention to any data that contradicted their priors and they all actively decided that preventing climate disaster is a waste of money.

And also, this person isn't having trouble figuring out that they're obligated to give at all; they're giving $10,000 a year, which isn't pennies

Meh, like I said, this is where I disagree out of my own experience. I make vastly less than LW, I was never lived in penury but I was buying groceries for my parents while I was in college for a little while, and I still give more than $10,000 a year.

Man, I want to start an advice column that's all about charity. Like, "here's how to do it. Pay off your own bad debts first (credit cards, home equity, etc.) Then, if you have managed that: Open a dedicated bank account, ideally one without fees and with either a checking account or a credit card directly billed from it. Then, if you have direct deposit, make sure N% of your paycheck goes straight into that account. Boom, that's your charity account. That money's not yours, so you don't emotionally mind giving it away! But on the other hand, it's an entire account full of money you get to give to whomever you like. Fun!!!"

[topaz_eyes]

Yes, yes LW, you owe society more, because chances are non-zero that you had help to make that high income; in some jobs you might even have made that income off the backs of others less fortunate than you. I like your proposal of half your after tax income (which sounds like it would be about $175K). If you don't think that's doable, you could start with 10% of your gross income and go from there. That alone would increase your giving to $70K.

[lemonsharks]

Imo if LW is a millionaire then they are ethically obligated to give away their money until they aren’t a millionaire anymore.

Or to really, really look at their profession and determine whether the work that gives them 700k/yr after tax is putting more good than awfulness into the world. Fossil fuel industry? Time to quit and do something else. Biopharma research scientist? Maybe keep doing what you’re doing. Celebrity plastic surgeon? Have you considered switching to doing mostly pro bono reconstructive work? Anesthesiologist? Have you done everything you can to forgive debts and charge rates your poorest patients can afford?

[melannen]

Around where I live, a millionaire is a 65-year-old retired schoolteacher with a perfectly normal suburban house they own outright after a 30-year-mortgage and the minimum retirement savings recommended to be secure. I'm not convinced you're ethically obligated to not have a house or retirement savings. (In fact, I would prefer if everybody had a house and enough retirement savings.)

That said, this person could buy a perfectly normal suburban house in cash anywhere in the country and then sock away enough in retirement savings in less than two years and then go become a public school teacher, so I don't think that applies to them.

[jadelennox]

Yeah, my mother and I have been looking at local Continuing Care Retirement Communities, and good lord they cost a freaking fortune. A million dollars in assets won't get you into any* of them unless you qualify for affordable housing. I'm not exaggerating; they have a financial component of the application and you have to show that you have enough money, and a lot of them are things like "$700K buy in, $7000 a month, and you have to prove that your post-retirement income is three times the monthly fee." (And seniors can't just up and move to another, cheaper part of the country where their support networks aren't.)

But as you say, unless the LW has been buying cryptocurrency or yachts, nothing about their letter implies any of the above would be difficult for them.

---

not "any". There's one being built here that's aimed for actual middle income people. it's very exciting! They also haven't broken ground yet, though. And there's one that's willing to help many seniors get classified as qualified for affordable housing, as long as they're willing to move into a studio with a galley kitchen, but that can be a rough ask for someone who's entering a frailer part of their life when they need more mobility, not less.

[melannen]

Yeah, I don't even know what counts as "middle income" anymore. I've known several people who've gone into that kind of housing, and none of them were what I'd call more than middle income - several of them were factory worker's wives - *but* they were all White pre-Boomers who had lots and lots of house equity they could put into it. Because you could buy a house and a couple of acres of land for half a year's factory pay in 1932. (These days if you want to buy a house on half a year's pay, you're making 700,000 a year.)

[ethelmay]

That's the old-fashioned definition of "millionaire," which no longer really means someone with a million in assets, because inflation has messed up the implications of that. It used to be that someone who had a million in well invested assets could live very luxuriously indeed by drawing off $30K or $40K per year, and never run out of money. These days you'd need maybe ten million to live in a remotely "millionaire" style. It's also often used for someone who makes a million dollars per year, which this person doesn't quite, but not so far off.

[cereta]

On a wee note, I do like the acknowledgement that there might be ways other than giving to organized "charity" to spread the wealth. I don't give a whole lot to organizations, but I do try to be there when a friend needs $50 to keep the lights on until payday.

[jadelennox]

Yeah, I am a firm believer that directly helping your friends out of a bind is one of the most important things you can do if you have spare money.

It can get tricky because of different ideas about obligation, and it's best to make sure everyone's on the same page, but it's important.

(Also, giving informally to panhandlers, buying groceries for your neighbors, tipping extremely well, etc.)

[ethelmay]

I'm calling bullshit on the "effective tax rate" of "about 50%," unless this person isn't in the US. The highest marginal federal tax rate is 37%, and effective rates are much lower. I suspect they're in California, where the highest marginal state tax rate is 13.3% (actually it would be 12.3% at their level, assuming they aren't married), and are adding together the 37% and the 12.3%. Also they're conflating gross income and taxable income.

[conuly]

Yes, this.

[tielan]

Generosity because LW thinks they should (to feel okay about themselves) vs. Generosity because of other people's need (Pay Dirt's take).

LW might be "doing good" by giving their money away but their letter doesn't make me inclined to think they're a particularly good person at heart.

[conuly]

The only way to accumulate that much money is to effectively steal from the poor. Unless LW anticipates being unable to work very soon, yes, you owe it to society because you live in a society.

Also, if LW lives in the USA then there is no flipping way that their tax rate is that high, even if LW really doesn't understand how tax brackets work.