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.)

[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

[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.)

[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?

[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.

[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.

[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.