Opponents of repeal only talk about one side of charitable giving – that which is motivated by the incentives of the death tax. The other side includes the personal, altruistic and spiritual motivations for making a charitable gift. In fact, charitable giving because of religious, moral, or altruistic sentiment is an American tradition that predates the death tax by 300 years. The effect of the death tax on philanthropy depends on which of these motivations is more influential in effecting donor giving.

The economist David Joulfaian published a study with the Treasury Department in 2005, in which he compared the effects of two different estate tax rates in two different years on charitable giving. In 1976 the estate tax had a top rate of 77%, while in 1982 the top tax rate was 65%. Despite the lower estate tax in 1982, there was an increase in charitable bequests by estates subjected to the tax cuts.

Joulfaian concluded that “Descriptive statistics on the pattern of giving in 1976 and 1982 show that giving to charity did not decline in the aftermath of tax rate reductions in 1982, and suggest that estate taxation may have little effect on bequests.”

Further research has been conducted on the incentives of the death tax and serves to confirm Joulfaian’s findings. As a result of the reductions in the death tax from 55% to 48% between 2001 and 2004, one might expect the size of bequests to shrink. However, just the opposite has occurred, with the size of the average bequest (on estate tax returns) growing more than 40% during that time period.

Moreover, the percent of taxable estate tax returns that made a charitable bequest grew from 20.6% in 1999-2001 to 21.2% for the period 2002-2004. In fact, another voice of charities, the Giving Institute, reported in their 2005 annual publication, Giving USA, that “Despite predictions, there has been no observed impact on charitable giving from the gradual change in estate tax filing requirements.”

On the other side of the coin, survey data shows that personal donor intent outweighs tax benefits as the incentive for making a contribution. In fact, a survey of the wealthiest families found that the primary motivating factor for increasing their charitable giving is to “find a worthy cause that you feel passionate about.”

The true story is that the death tax destroys wealth producing potential, thereby decreasing the overall level of economic activity and concomitantly, the level of future philanthropic activity. The average American family-business owner or farmer, as well as their future heirs, are rooted members in their local communities. They have a direct interest in sustaining and improving the ground from which their enterprise has grown. These individuals are often life-long, committed altruists. Encouraging and promoting the longevity of their involvement in their community is in the interest of all charities.

The death tax ends or reduces their charitable involvement to the extent that it often results in the complete or partial sale of the enterprise. Though charities may benefit from final large donations designed to reduce total tax liability, they lose the long-term involvement of the family in the charity. The economic data presented above shows that the death tax results in no discernible benefit to charities, meaning that it very well may harm charities by destroying their donors’ financial base.

A survey by two scholars at Boston College indicates that many wealthy Americans would make considerably greater charitable contributions, except for the death tax. According to the survey, respondents indicated that they expected to contribute 28% more in taxes than they desired, while they would be contributing 17% less to heirs and 10% less to charity than desired. In the absence of the death tax one would expect the contribution to charity to markedly increase.

10. Ibid.

11. Joint Economic Committee calculations based on data from Internal Revenue Service, “Estate Tax Returns,” (various years), online at http://www.irs.gov/taxstats/indtaxstats/article/0,,id=96442,00.html

12. Ibid.

13 . JEC calculation using data from AAFRC Trust for Philanthropy, Giving USA 2005, (New York, NY: AAFRC Trust for Philanthropy, 2005), 29.

14. Paul G. Schervish and John J. Havens, “Extended Report of the Wealth with Responsibility Study,” Social Welfare Research Institute, Boston College (March 2001), 27

15. Schervish and Havens, 35.

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