An Appeal to Charity: Using Philanthropy to Revitalize the Estate Tax

Abstract

Proponents of the estate tax generally contend that it is crucial to preventing the economic and moral harms that result from concentrated wealth. The tax has nonetheless met with enormous political hostility, even from Americans who are unlikely to ever pay it. This article draws on insights from cognitive psychology to propose a novel method of rallying public support for what has been vividly deemed the death tax.

The article proposes that Congress amend the estate tax by replacing the charitable deduction with a charitable credit. This would have the practical effect of allowing charitable bequests to offset the amount an estate owes the federal fisc. As such, the proposal dramatically recasts the debate surrounding the tax. Rather than requiring families of the recently deceased to hand over large sums of hard-earned money to the federal government (as the story is now told), the charitable credit allows decedents to identify the charities that will benefit from their wealth. This comports with what lower and middle class Americans anticipate doing in the face of great wealth; capitalizes on widely-held beliefs about the importance of charities and the good they create; and provides greater control and benefits for the taxpayers themselves. The reform also offers benefits to estate tax proponents, to individuals committed to shrinking the size of government and expanding the non-profit sector, and to charities.

Keywords: Estate taxation, charity, philanthropy, wealth transfer taxation