Behind the Headlines: Proposed ‘death Tax’ Repeal

With tax cuts the talk of the town, Jewish philanthropists are worried about another part of President Bush’s fiscal plan: the repeal of the estate tax.

Many funders are concerned that charitable giving will suffer if the estate tax – which levies a high tax on the estates of recently deceased individuals – is repealed. Some are calling for reforming, rather than ending, the tax.

Marcia Hazan, trustee with Foster Family Foundation in San Diego, said she “absolutely” stands to gain if the tax is repealed, “but as my father always says, it’s a privilege to pay taxes. Particularly, I feel that way, because I didn’t earn the money, he earned the money.”

Hazan and other representatives of family foundations and philanthropies discussed the issue at a Jewish Funders Network meeting last week in Atlanta where philanthropist Edith Everett called for reform of the estate tax. Everett suggested making adjustments for family farms and people with smaller estates, but objected to a repeal.

Everett told JTA that hundreds of people approached her and thanked her for speaking out. “There wasn’t a single person who said, even in a nice way, ‘I disagree,’ ” Everett said.

Everett and hundreds of other philanthropists, including William Gates Sr. and George Soros, have signed a petition asking that the estate tax, which many believe serves as an incentive to leave one’s wealth to charity, be preserved. Responsible Wealth, a project that brings together people who are concerned about deepening economic inequality, are organizing the petition.

The Bush administration argues the estate tax, or “death tax,” impedes economic growth because it levies another layer of taxes on people, and also creates a disincentive for seniors who want to save for their children or grandchildren.

The Clinton administration had opposed the repeal of the estate tax, saying it was fiscally unwise, would reduce the overall fairness of the tax system and would harm charitable giving.

Only the wealthiest 2 percent of all estates pay any estate tax at all.

Some studies have estimated that repeal of the estate tax could reduce charitable gifts and bequests by close to $6 billion annually.

The organized Jewish community has stayed quiet on the issue, worried about offending some of their biggest donors if they take an unpopular stance.

United Jewish Communities, the North American Jewish community’s central fund- raising and social services agency, has not taken a position. One lay leader, who asked not to be named, said the repeal could discourage charitable giving.

Others close to the issue note that while no one gives to charities simply because of the estate tax, it does provide a powerful incentive. The warning, then, is that charitable-minded people will still give if the tax is repealed but they may give significantly less.

The Jewish Council for Public Affairs is looking into the issue and while the Reform movement’s Union of American Hebrew Congregations has not come out against the repeal officially, its Commission on Social Action has spoken out against the proposed change.

Another major concern is lost revenue to the government, which could mean cuts in services and programs, if the estate tax is repealed. Some estimates show eliminating the estate tax would cut $28 billion from the government’s coffers.

The repeal of the estate tax is drawing more attacks than the rest of the 10- year, $1.6 trillion Bush tax cut plan.

Bush’s tax cut plan will expand the federal charitable deduction to allow individuals who do not itemize on their tax returns to deduct contributions to charities. But the amount these individuals would contribute is highly unlikely to offset the amount wealthier people would have given under the estate tax – since nonitemizers tend to be in a lower tax bracket.

White House officials are now saying plans to repeal the estate tax might be delayed to keep the cost of Bush’s tax plan down in the first year.

Repeal of the estate tax is popular with many members of Congress and supported by a powerful small-business lobby that Bush is counting on to help sell his tax plan.

Sue Hoffman of the Shefa Fund – a Philadelphia-based nonprofit organization that supports liberal and pro-peace causes, primarily in Israel – says her group will support the petition to preserve the estate tax and has heard from many other Jewish funders that the estate tax should stay.

Hoffman views the estate tax as a codification of Jewish beliefs into law.

“Tax cuts that benefit the wealthy are unfair and are not the best reflection of Jewish values,” she said.