Monday, June 8, 2009

Treasury's Joulfaian Publishes "On Estate Tax Repeal and Charitable Bequests"

David Joulfaian, an economist at the Treasury Department's Office of Tax Analysis, has published in Tax Notes (subscription required) an articlethat expresses his views (not necessarily those of the Treasury Department) regarding whether estate tax repeal would reduce the up to $20 billion in annual charitable bequests reported to the IRS on estate tax returns and, if so, to what extent.  He ultimately concludes that it is difficult to make this determination for a variety of reasons.  These reasons include the fact that existing studies indicate that such giving is sensitive to both tax prices (i.e., higher tax rates stimulate giving) and to wealth (i.e., reduced bequeathable or disposable wealth reduces giving), and the fact that we do not have reliable data about charitable bequests in the United States before the enactment of the estate tax.  His report also highlights a variety of other analytical difficulties, including the difficulty of controlling for differences among donors that may explain why the percentage of estate wealth given varies significantly even when estate tax rates remain unchanged.  His bottom line is that attempting to answer the question he poses is "a humbling experience and one that requires constant review of our models and methods."  This result is particularly interesting given that in a 2000 article he concluded that "[t]he overall effects of the estate tax . . . are likely to be modest as charitable bequests are wealth elastic."


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