Estate Taxes and Philanthropy
Repeal of the estate tax is very likely to cause a substantial decline in charitable giving thereby causing important institutions including universities, hospitals, and charitable foundations to lose contributions vital to the services they perform and support. The best available evidence, noted in the chart below, compares giving before, during, and after the year 2010 when the estate tax was temporarily not in force. Bequests from estates declined by 37% over the previous year then rose by 92%. In what follows, we also provide charts that identify the amounts of contributions received by institutions in nearly two dozen states to illustrate the potential damage that might be caused by repealing the estate tax.
The estate tax is one of the most important motivators for charitable giving for those at the very top of the income distribution, the one in five hundred Americans (0.2%) rich enough to have estates subject to the tax–$5.5 million for individuals, $11 million for couples. Wealthy families either give while living in order to reduce the size of their estates or make bequests for distribution upon their deaths. These gifts to schools, hospitals, human services, the arts, and other vital needs play important roles in every state, particularly now that public spending at all levels of government has declined.
Americans with enough wealth to pay the estate tax are charitable people who will surely give in the absence of an estate tax or a charitable tax deduction but any such person, or her tax advisor, will admit that tax policy plays a role in determining the size of charitable gifts.
The link below provides charts that identify the categories of recipients that received a combined total of over $166 billion in very large charitable donations ($1 million and over) between 2005 and 2017 and the total amount each category received in that period.
In state after state, institutions such as hospitals and universities stand to lose a substantial portion of just these kinds of transformative gifts if Congress repeals the estate tax and removes such an important incentive for major giving.