Estate tax controversy – Nonprofit officials divided

If the estate tax were repealed, some believe the resulting flow of money into the U.S. economy could actually increase charitable giving in the long run, the Chronicle of Philanthropy reported in its July 27 issue.

Paul Schervish, director of the Social Welfare Research Institute at Boston College, is one such believer. Last year, he and his colleague John. J. Havens projected that between $6 trillion and $25 trillion would flow into charities over the next 50 years as older people passed their wealth to their children.

At that time, Schervish and Havens suggested that the lower figure of $6 trillion was probably closer to the truth.

Schervish told the Chronicle, however, that ending the estate tax could make the higher number — $25 trillion – more likely, because more money would be available to help the economy grow.

Schervish also said that the wealthiest Americans have been giving a greater portion of their estates to charities rather than heirs in recent years. From 1992 to 1997, among estates of $20 million or more in which there was no surviving spouse, the total value of the estates rose 65 percent, estate tax revenue rose 67 percent, bequests to heirs increased 57 percent, and charitable bequests increased 110 percent, Schervish said.

Even if the estate tax were repealed, Schervish said, the very wealthy would continue to increase the portion of their wealth that they leave to charity.

Other critics of the estate tax believe that its repeal would not harm revenues even in the short run. They say that many wealthy donors would continue to give, but in new ways that would take advantage of other charitable tax deductions. In addition, they say, many donors aren’t primarily motivated by their tax bill.

Others are not so sure. President Clinton has vowed to preserve the estate tax, and has said that repeal could cost charities $5 billion to $6 billion a year. His figures, and his sentiment, are shared and supported by many people in the nonprofit world.

For full story, see the Chronicle of Philanthropy.

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