"The level of charitable giving as a percentage of income and economic output has remained relatively constant for decades," declares Stuart Butler of the Heritage Foundation. "But donations do tend to track economic conditions," he concedes, "meaning that an improvement in the economy tends to leverage a more rapid increase in giving." Butler affirms that "people's tendency to give is quite sensitive to their view of the economy. In the past five years, fast economic growth and high consumer confidence have coincided with a rise in both the volume of donations by individuals and corporations and the percentage of income donated." He concludes that "steps to stimulate economic growth (and thus personal income) -- such as marginal tax rate cuts designed to spur savings, investment, and work -- are very likely to be associated with increased giving."
Nevertheless, Butler sees "little evidence that changes in the tax code as such have a significant long-term effect on total giving. Over the past two decades," he recalls, "there have been quite dramatic changes in marginal tax rates, the number of tax brackets, and other changes that influenced the aftertax 'price' of charitable donations." While acknowledging that "tax changes may have influenced the short-term timing of donations," Butler sees no "significant relationship between these tax changes and charitable giving over the long term."
Butler rejects the oft-repeated claim that reduction or elimination of the estate tax will have a negative impact on charitable giving, prompting potential donors to "leave all of their money to their children or other non-charitable causes." On the contrary, he contends that "any public policy that increases the amount of savings available to households -- such as eliminating estate taxes or other taxes on savings -- will increase the 'residual' left to charitable organizations as well." Philanthropic organizations naturally want "to see tax policy that will increase donations," but their opposition to repeal or reduction of the estate tax is misguided, says Butler. Instead, they should support "tax changes that will boost the long-term growth of income and savings."
Mary Mahoney of the United Seniors Association points out that "the larger one's estate is, the less likely his heirs will have to pay death taxes. It is the wealthiest individuals -- not the middle-class farmer or small business owner -- who can afford to take advantage of the many elaborate estate planning techniques available to shelter assets from posthumous taxation," Mahoney emphasizes. "As a result," she notes, "the death tax falls disproportionately on middle-income taxpayers and on estates comprised of small businesses and farm assets."
According to Mahoney, "The death tax fails to achieve its dubious goal of breaking up and redistributing concentrations of wealth by confiscating assets from those who have gotten 'too rich' during their lifetime. Yet," she adds, "it also fails to achieve the first goal of any legitimate tax: to raise revenue for the treasury with minimal burden on taxpayers. The death tax imposes enormous costs on hardworking taxpayers and the private economy just to raise a little more than one percent of all federal revenues."