Facebook CEO Mark Zuckerberg made waves this week with his announcement that he will eventually giveaway virtually all of his wealth for charitable purposes. As Bloomberg’s Jesse Drucker noted, Zuckerberg appears poised to implement his plan through a new entity that, unlike more conventional charitable foundations, won’t actually be required to act philanthropically.
But for those familiar with the tax avoidance tactics practiced by the Facebook Corporation in the U.S. and abroad, it should come as no surprise that Zuckerberg’s approach to philanthropy is set up to avoid any unnecessary tax liability.
Facebook has used an executive stock-option tax break to lower its taxes by $4 billion dollars over the past five years, allowing the company to pay a federal income tax rate of only about 8 percent during that time. Put another way, the company has been able to shelter almost eighty percent of its profits from tax during this period using just this one tax loophole. And Facebook has also been an unabashed user of a complex foreign tax dodge known as the “double Irish.”
These aggressive tax-avoidance maneuvers impose a real cost: every dollar of income tax that Facebook doesn’t pay is, ultimately, a dollar that must be made up by the rest of us, either through higher taxes on middle-income families or draconian cuts in infrastructure spending.
Since Andrew Carnegie, our country has had a long tradition of philanthropy among the wealthiest Americans. If Mark Zuckerberg ultimately lives up to his promise to donate his wealth to needy causes, his contributions could make a huge difference in the lives of many Americans. But we shouldn’t lose sight of the fact that his company’s pattern of aggressively reducing corporate income tax payments is making the lives of Americans worse right now, by shortchanging America’s tax system of needed revenues.