NCPA


Policy Issues

NCPA Publications

Both Sides

Commentaries

Audio/Visual


NATIONAL CENTER FOR POLICY ANALYSIS
HOME / DONATE / ONE LEVEL UP / ABOUT NCPA / CONTACT US
Does the Estate Tax Increase Giving?
Daily Policy Digest

Tax Issues / Estate Tax

Wednesday, September 24, 2003
The estate tax encourages charitable giving in life and at death by allowing a deduction for charitable bequests. However, "the tax reduces charitable gifts by reducing the amount of wealth decedents can allocate to various uses. The net impact of these effects is ambiguous in theory," say analysts Jon M. Bakija and William G. Gale.

  • In 2001, charitable contributions totaled $212 billion, of which living individuals gave 76 percent, bequests accounted for 8 percent, foundations accounted for 12 percent, and 4 percent was given by corporations, according to the AAFRC Trust for Philanthropy 2002.
  • The estate tax applies to net estates in excess of $1 million, and charitable bequests, amounting to $16.1 billion, or 7.5 percent of the value of gross assets, appeared on one-sixth of estate tax returns.
The Urban-Brookings Tax Policy Center analysts estimate that repealing the tax would reduce charitable bequests by between 22 and 37 percent, or between $3.6 billion and $6 billion per year. But is that true?

NCPA analysts note that these estimates do not include the reduction in wealth reported on estate tax returns due to tax planning to avoid the 41 to 49 percent death tax. By some estimates, two-thirds of the wealth of the nation's richest families goes untaxed. A reduction in such legal tax avoidance, say supporters of permanent repeal, would compensate for the reduced percentage of giving motivated by tax considerations.

Source: Jon M. Bakija and William G. Gale, "Effects of Estate Tax Reform on Charitable Giving," Tax Policy Issues and Options No. 6, July 2003, Urban-Brookings Tax Policy Center.

For Urban-Brookings text
http://www.brook.edu/views/articles/gale/20030617.htm

For a Bruce Bartlett estate tax study
http://www.ncpa.org/studies/s235/s235.html

For more on the Estate Tax
http://www.ncpa.org/iss/tax/

 Back
12770 Coit Rd., Suite 800 - Dallas, TX 75251-1339 - 972/386-6272 - Fax 972/386-0924
601 Pennsylvania Avenue NW, Suite 900 South Building, Washington, DC 20004 - 202/220-3082 - Fax 202/220-3096
Copyright © 2003 National Center for Policy Analysis - All rights reserved.