Louis Bidou

I just finished Yvon Chouinard's Let My People Go Surfing, about the history and philosophy of Patagonia. A thoughtful and inspiring read I highly recommend if you hope for a more sustainable way to do business.

Among several other things, Chouinard explains how donations deductible from taxes are less of a trick to reduce your taxes, and more of a way to choose how your tax money will be used.

 

Patagonia, as many other companies, committed to give at least 1% of their sales to environmental nonprofit organizations – this donation being deductible from taxes.

At first, I was a bit disappointed by the logic of giving and, at the same time, decreasing your taxes. To be honest, my heart never really understood the rationale behind it. If you can afford it, shouldn’t you donate regardless of the potential tax deduction? Paying less taxes means less resources for public initiatives, period, right?

Well, of course, it is mathematically better to both make donations and pay your taxes in full. This is for instance what the Pinault family decided while committing to give 100m EUR to the reconstruction of Notre Dame de Paris, in April 2019.

But Yvon Chouinard helped me understand that it was less of a trick to reduce your taxes, and more of a way to choose how your tax money will be used.

Let's say you choose to give 100 USD to a cause, knowing this donation will grant you with a 66% tax credit, 66 USD. The cause you decide to support will actually receive 100 USD. This is real money, composed of 34 USD out of your very own pocket, and 66 USD you actually still have in your pocket because the State accepted to let it to you as a tax credit. Those 66 USD are the State’s money, but you are the one choosing how to use it. You are thus basically telling to the State, “Listen, I’m going to give 34 USD to this cause, and also force you to do twice as much and give 66 USD.”

Pretty cool. This is a super powerful tool for people who can afford it, and who want to be more active on how the State uses your share of contribution to social matters.