Position Statement

INDEPENDENT SECTOR Policy Position
on the Estate Tax and Charitable Tax Bequests

Americans have a long tradition of generous support for charity. Living up to that tradition, Americans in 1999 gave more than $190 billion to charity (roughly 2% of income) of which approximately $15 billion was contributed through charitable bequests. Favorable tax rules strongly support this tradition of generosity, and INDEPENDENT SECTOR has long advocated for preserving and enhancing tax incentives for giving. 

INDEPENDENT SECTOR supports an expansion in private giving based on the principles that America’s nonprofit organizations provide a valuable public good to society and they depend on a strong base of charitable giving. Therefore, we oppose repeal of the estate tax, but we believe that modifications to the estate tax can preserve the special treatment of charitable bequests and strong incentives for charitable giving.

Repeal of the estate tax would eliminate a strong incentive to give through an individual’s estate. It would remove an incentive for the wealthiest Americans, who have a special responsibility to provide leadership in giving, to make charitable bequests. Currently, over 75% of charitable bequests come from estates valued over $2.5 million. Therefore, modifications in the estate tax law, such as increases in the exemption level, would still provide a strong incentive for the wealthiest Americans to give.

Repealing the estate tax would have two countervailing effects on charitable giving. On the one hand, repeal would leave more wealth in private hands and this positive wealth effect could stimulate increased giving. On the other hand, repeal would eliminate the tax incentive to give and this could likely reduce giving. While there is considerable room to debate the magnitudes of these wealth and incentive effects, our review of the research indicates that the net result would be a decrease in charitable bequests of between a tenth and a third. This would result in a decrease in giving through charitable bequests of between $1.5 to $5 billion, based on 1999 levels.

A suitably modified estate tax is also good for society, insofar as it serves to check the accumulation of vast sums of inherited wealth in the hands of a very few. At a time when the gap between rich and poor is widening, the estate tax plays a beneficial role in society.

We believe that any changes in tax policy should give due consideration to the effect on charitable giving. Given the societal importance of charitable giving and the work of charitable organizations, policy makers should seek to "do no harm" in terms of incentives for charitable giving. The estate tax provides an important incentive for the wealthiest Americans to give, thereby advancing the public good through the work of charitable organizations. Many Americans with sizable estates give generously through their bequests. Tax policy should encourage them to continue to do so.

Adopted by the INDEPENDENT SECTOR Board of Directors, March 2001

Download INDEPENDENT SECTOR's Guiding Principles for Public Policy on Charitable Giving (PDF--49KB) Press Release

INDEPENDENT SECTOR Policy Position Statements on:
Charity Tax Credits
Charitable Deduction for Nonitemizers
IRA Charitable Rollover