Thursday, August 5, 2004

The Congressional Budget Office has released The Estate Tax and Charitable Giving. Here is the summary of the 20-page report:

This paper by the Congressional Budget Office (CBO), prepared at the request of the Ranking Member of the Senate Finance Committee, examines the effect that changing the estate tax would have on donations to charity. Because charitable bequests lower the taxable amount of estates, the tax gives people an incentive to contribute to charity at death rather than leave assets to heirs. Furthermore, the estate tax provides an incentive to make charitable contributions during life. The paper finds that increasing the amount exempted from the estate tax from $675,000 to either $2 million or $3.5 million would reduce charitable giving by less than 3 percent. However, repealing the tax would have a larger impact, decreasing donations to charity by 6 percent to 12 percent.

For aa related analysis by the Center on Budget and Policy Priorities, see here.