Tax Policy and Donations

December 20, 2010 at 3:44 PM

The new tax law just signed by President Obama includes reforms to the estate tax that may affect charitable donations, columnist Harvey Lipman notes.

Under the new law, estates worth $5 million or less are exempt from the tax, and those that are subject to it pay a 35 percent tax rate. Without the new law, the exemption would have been $1 million next year and the rate 55 percent.

The fear, according to Independent Sector in Washington president Diana Aviv, is that the aged wealthy will grant less of their largesse to charity upon their demise, since the tax penalty of passing it on to their heirs will be lessened or in some cases eliminated.

According the Lipman, the conservative counterargument is that “heirs will have far more money available to them, which they argue will translate into more cash available for giving.” Well, yes, it will be available for giving. It will also be available for jet skis, strippers, and blow. Really depends on the heirs.

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Entry filed under: Economic Issues.

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