Charitable Bequest Giving in the USA

Abstract

The estate tax plays an important and controversial role in many aspects of our society. This paper focuses on one of the more important and more controversial aspects of the estate tax. Namely, we examine the relationships between changes in the estate tax rate and estate tax exemption levels and aggregate charitable bequest giving using time series data. During life, donors give for many reasons, which may or may not be affected by the tax deductibility (only about one-fourth of US households itemize their taxes, so for three-fourths, the price of giving a dollar is a dollar). Likewise, the decision to give at death is motivated by many factors, including the tax implications for some, but it must be recalled that less than two percent of Americans pay any estate tax, and less than half of them pay anything that would be considered a meaningful tax (Rooney and Tempel, 2001). That said, for very large estates, the exemption levels and the estate tax rates can be a considerable factor in estate planning.