No, because my country (the USA) doesn't tax "cash spending". It taxes income, and it (well, in most cases, individual states), taxes certain sales (generally, this tax is collected by the seller, but when its a foreign seller the buyer may be resposible for it as a "use" tax.) If I don't get a taxable good or service in exchange, its not a taxable sale, and the seller doesn't have to collect sales tax (and, if the seller is foreign, I don't have to pay use tax.)
For a foreign "non-profit", I won't get a deduction from taxable income for income tax purposes for the donation the way I would if the donation was to a local non-profit [1], but I don't have to pay an extra "cash spending" tax the way you describe.
[1] Actually, strictly this is a local charity, which is a narrower category than non-profits. Donations to local non-charity non-profits are generally not tax deductible to the person making the donation, even if the non-profit is itself tax-exempt.
I'm genuinely not understanding this. Taxing "income" and "cash spending" is the same (at least, where I am taxed).
If I am a business and have earned $1000, keeping it in the bank is exactly the same as if I withdrew that $1000 and put it under the bed in $20 notes. I pay tax on that $1000. I can give it to Watsi, who is outside of my country's tax jurisdiction, and I must pay tax on that $1000.
Taxing "income" and "cash spending" is the same (at least, where I am taxed).
The upthread scenario addressed income taxation, and you asked whether or not people were not then taxed again on the after-tax amount because it was cash spending. Taxing income (with certain exceptions) may be generally comparable to taxing cash spending (with similar exceptions), but you don't generally get hit with both.
If I am a business and have earned $1000, keeping it in the bank is exactly the same as if I withdrew that $1000 and put it under the bed in $20 notes. I pay tax on that $1000. I can give it to Watsi, who is outside of my country's tax jurisdiction, and I must pay tax on that $1000.
Sure, if you have $1000 of business income that isn't used for a tax-deductible business expense or tax-deductible charitable contribution, you have to pay tax on that. So, if you're marginal rate of taxation is 30%, a $1,000 donation to a local (and therefore, deductible) charity would actually cost you $700. So, if you could afford to give that $700, and find that Watsi is a better charity for your charitable impulses, enough to warrant the fact that you'll only be able to give them $700 for the $700 cost, rather than $1,000, you should just give them $700. That was the point lubos made upthread [1].
You then asked [2] whether that $700 didn't create an additiona tax liability as "cash spending". No, it doesn't. The $700 is the amount of the $1,000 left after the tax liability for not spending it on a deductible purpose is considered.
You were taxed when you received that money, so you don't have $1000, you only have $700 (assuming a 40% tax rate - sub in your own rate as applicable). If you get a tax deduction for giving to Watsi, you can give them $1000 and only lose $700 out of pocket. If you do not get a tax deduction for giving to Watsi, then you can give them $700 and lose $700 out of pocket. In either case, you are giving them $700 out of pocket.
You were taxed when you received that money, so you don't have $1000, you only have $700 (assuming a 40% tax rate - sub in your own rate as applicable).
Comments
No, because my country (the USA) doesn't tax "cash spending". It taxes income, and it (well, in most cases, individual states), taxes certain sales (generally, this tax is collected by the seller, but when its a foreign seller the buyer may be resposible for it as a "use" tax.) If I don't get a taxable good or service in exchange, its not a taxable sale, and the seller doesn't have to collect sales tax (and, if the seller is foreign, I don't have to pay use tax.)
For a foreign "non-profit", I won't get a deduction from taxable income for income tax purposes for the donation the way I would if the donation was to a local non-profit [1], but I don't have to pay an extra "cash spending" tax the way you describe.
[1] Actually, strictly this is a local charity, which is a narrower category than non-profits. Donations to local non-charity non-profits are generally not tax deductible to the person making the donation, even if the non-profit is itself tax-exempt.
I'm genuinely not understanding this. Taxing "income" and "cash spending" is the same (at least, where I am taxed).
If I am a business and have earned $1000, keeping it in the bank is exactly the same as if I withdrew that $1000 and put it under the bed in $20 notes. I pay tax on that $1000. I can give it to Watsi, who is outside of my country's tax jurisdiction, and I must pay tax on that $1000.
The upthread scenario addressed income taxation, and you asked whether or not people were not then taxed again on the after-tax amount because it was cash spending. Taxing income (with certain exceptions) may be generally comparable to taxing cash spending (with similar exceptions), but you don't generally get hit with both.
Sure, if you have $1000 of business income that isn't used for a tax-deductible business expense or tax-deductible charitable contribution, you have to pay tax on that. So, if you're marginal rate of taxation is 30%, a $1,000 donation to a local (and therefore, deductible) charity would actually cost you $700. So, if you could afford to give that $700, and find that Watsi is a better charity for your charitable impulses, enough to warrant the fact that you'll only be able to give them $700 for the $700 cost, rather than $1,000, you should just give them $700. That was the point lubos made upthread [1].
You then asked [2] whether that $700 didn't create an additiona tax liability as "cash spending". No, it doesn't. The $700 is the amount of the $1,000 left after the tax liability for not spending it on a deductible purpose is considered.
[1] https://news.ycombinator.com/item?id=8287739
[2] https://news.ycombinator.com/item?id=8287768
You were taxed when you received that money, so you don't have $1000, you only have $700 (assuming a 40% tax rate - sub in your own rate as applicable). If you get a tax deduction for giving to Watsi, you can give them $1000 and only lose $700 out of pocket. If you do not get a tax deduction for giving to Watsi, then you can give them $700 and lose $700 out of pocket. In either case, you are giving them $700 out of pocket.
30%, actually, or $600 @ 40%.
yea, oops.