Social capital vs. Personal Capital
In America there is a social capital structure that requires all of us to share with society through taxes, so that we can help with the common needs all over the nation. Not just with helping in our community, but with helping people with all kinds of circumstances that we as a nation care about. One of our options as citizens is to take certain taxes that we would otherwise be required to pay to satisfy this social obligation, and redirect them to specific charities.
Our message comes to the issue that there are 3 major taxes that help carry out our commitment to social capital:
- Estate and gift tax
- Capital gain tax
- Ordinary income tax
These are the three ways that we as citizens share every dollar that we earn, grow, or try to give away to our children, pass/transfer to our children. These are the three taxes, the three circumstances in our lives that we share with government through tax. And we share them over and over again: We share it when we earn it through income tax, when we grow it through capital gain tax, and when we try to transfer it to our heirs.
Every dollar we earn is part personal capital (money we keep for ourselves) and part social capital (money that benefits those around us). The two beneficiaries of our social capital are government and charities. Planned giving simply represents our opportunity to take a more active role in choosing how much of our social capital we direct to our favorite charities, and how much goes to the government.
This doesn't mean we are evading a tax or cheating the IRS. Instead, we are simply accepting the offer to work within the rules established by congress to more efficiently distribute social capital.
Our tax system allows us to enjoy various levels of tax relief if we're willing to plan a gift; even though the gift may not go to charity until the end of our lives, the tax relief it provides is enjoyed today.