The estate tax generates a significant amount of charitable contributions: In 1999, the gross value of estate tax filers' estates was $196.4 billion; they took $81.7 billion in deductions, paid $27.8 billion in estate taxes, and made charitable bequests of $14.58 billion. Total charitable bequests of all estates, including those of estates not required to file for the estate tax, amounted to $15.6 billion.
Charitable bequests were 8.2% of all charitable giving in 1999, not far behind giving by foundations (10.4%), and higher than giving by corporations (5.8%).
Increases in charitable giving due to the estate tax are greater than the tax revenues foregone.
A variety of nonprofit sectors benefit from charitable bequests: In dollar amounts, roughly 1/3 (31.6%) of charitable bequests go to educational, medical, and scientific institutions (think colleges and universities), and another 30.9% are gifts to or capitalizations of foundations. Another fourth (24.5%) of bequests goes to other charities, primarily human service providers. Remember, the bequests to foundations end up in the future as grantmaking to nonprofits, including many human service delivery and social change advocacy nonprofits.
Religious organizations also benefit from charitable giving spurred by the estate tax: In terms of numbers of bequests, religious organizations receive the most bequests (34.1%), followed by 29.7% for institutions of higher education, and 25% for "other" (human service) charities.
Even with the incentive of the estate tax, very wealthy households give less in charitable donations than other income groups: Less than one out of five estate tax filers made charitable bequests in 1998 and 1999. Overall, the very wealthy give away only one half of one percent of their net worth for charity annually (the wealthiest fifth gave only 0.4%). Compare that to the generosity of the least wealthy in our society: the lowest fifth of the U.S. population (with positive net worths) give 13% of their wealth to charity compared to less than 1% for all other income strata.
Professionals know the importance of charitable bequests in estate planning: Estate tax advisors believe that making charitable bequests should be a significant component of estate tax planning, but even with the presence of the estate tax, they find it difficult to raise the issue with many of their clients. Without the estate tax, that would be even more difficult.
The importance of giving by the very wealthy is clear-they have the capacity to give. Estate tax filers with estates of $600,000 to $1 million gave 3.5% of the value of their estates to charity; estates valued at $20 million or more gave about 26% of the value of their estates as charitable bequests.
The very wealthiest estates generate the bulk of charitable bequests: Almost half of the very largest estates (above $20 million) make charitable bequests, averaging $40.2 million. For estates of $10-20 million, only 35% made bequests, average size of $3.46 million.
Bequests represent 28% of the lifetime charitable giving of the very rich.
Income-earners tend to be more charitably generous than wealth-inheritors: One cannot depend on heirs for charitable giving comparable to the charitable giving of the people who earned the money. For every thousand dollars of entrepreneurial (earned) wealth, an entrepreneur will give $4.56 to charity; for every thousand dollars of inherited wealth, an heir will give only 76 cents.
Eliminating the estate tax will cost billions in lost charitable bequests: Although estimates vary, every quantitative study on the impact of the estate tax shows that eliminating the estate tax will have a tremendously negative impact on charitable bequests. Estimates in lost charitable bequests range from 12% to 80% annually, with most estimates seemingly falling in the 35-60% range.
The impact goes beyond charitable bequests to annual charitable giving lost as a result of the potential repeal of the estate tax: With the repeal of the estate tax, annual charitable giving will also suffer, because wealthy households make charitable bequests not simply at the time of estate planning, but they plan for using their wealth during their lives as well. Some estimates suggest that for every dollar of charitable bequests lost due to the elimination of the estate tax, there will be a another dollar lost in annual giving.
