June 26, 2003 | Read Time: 2 minutes
If the estate tax were repealed, Americans would give about $10-billion less each year to charity than they now do, according to a new report. Hardest hit, says the report: private foundations, which typically receive the greatest share of money from charitable bequests.
The report, prepared by OMB Watch, a Washington group that monitors government spending, fuses the results of several studies on charitable giving, most notably a soon-to-be-published analysis of 74 years of federal estate-tax returns by officials at Washington’s Brookings Institution, a public-policy think tank.
That study finds that a repeal of the estate tax would cause a drop of 22 percent to 37 percent in total charitable bequests, a loss of as much as $6-billion a year based on 2001 giving figures. The study also predicts a 12-percent decline in annual charitable giving by people who would have otherwise faced the estate tax, representing an additional loss of $5-billion in donations.
Under current law, the estate tax would be phased out gradually in coming years, then would be repealed entirely for one year in 2010. After 2010, without new legislation, the tax would be restored. The U.S. House of Representatives voted last week to make the repeal permanent, but the Senate is not expected to pass the measure.
The OMB Watch report says such a move would be “potentially devastating” to nonprofit groups around the country. Without the estate tax in 2001, the report says, for example, gifts to foundations would have dropped by as much as $2.5-billion. And since most foundations increase their assets by accruing investment income over time, the impact of that annual loss would be felt for years, the report says.
Education, medical, and scientific institutions would suffer the second-greatest fund-raising setback in the absence of the estate tax, according to the report. Based on 2001 data, those institutions would lose as much as $1.7-billion a year in gifts. Religious groups, which typically receive about 10 percent of the total money from charitable bequests, stand to lose up to $600-million a year.
Proponents of the estate-tax repeal take a different view, saying that it would help nonprofit groups because donors would have more money to give to them.
The report, “The Estate Tax and Charitable Giving,” is available on OMB Watch’s Web site at http://www.ombwatch.org/article/articleview/1561/1/18.
