Wednesday, July 9, 2008
Prof. Madoff uses the recent case of Leona Helmsley's trust which may leave as much as $8 billion for the benefit of dogs (discussed earlier on this blog) as an example of how "American taxpayers subsidize the whims of the rich and fulfill their fantasies of immorality." Rather than arguing that the charitable deduction is poor policy generally as every deduction be it for charity, a gift to a spouse, or an annual exclusion gift, increases the tax burden on everyone else, she claims that the charitable deduction should be limited as follows:
There should be a limit — a dollar amount or a percentage of the estate — on the estate tax charitable deduction. People could still give to charity as they like, but after a point they would be giving after-tax dollars. The deduction should be lower for bequests to private foundations than for money given directly to good causes.
There is an unstated assumption in Prof. Madoff's argument, that is, that is it appropriate to impose a gift or estate tax in the first place. Prof. Madoff claims that it is unfair for donors to tie up "our" resources. What she fails to recognize is that none of the resources which the donors are restricting belong to "us" -- they belong to the donor.
Special thanks to Matthew B. Bogin (attorney, Rockville, Maryland) for bringing this article to my attention. Mr. Bogin pointed out to me that one of the reasons for retaining wealth transfer taxes is that they encourage gifts to charity and that repeal of tax (and hence no need for a charitable deduction) would actually hurt charities.