Originally created 02/05/01

Not all charities want to kill estate taxes



WASHINGTON - The way Ronda Johnson sees it, there are two kinds of people in the world: those who give to charity and those who don't.

"People who are givers give, and people who aren't givers don't give. And it really doesn't matter what the law is," said Johnson, executive director of the University of Cincinnati Foundation.

Not exactly, said Dot Ridings, president of the Council on Foundations in Washington, D.C. It's true that most people who give do so because they want to support a favorite cause and not because they are looking for a tax write-off, Ridings said.

"But tax policy absolutely has an impact on the size of the gift," she said.

Ridings and others in non-profit agencies are closely watching the congressional debate over whether to eliminate the federal estate tax.

Rep. Jennifer Dunn, R-Wash., filed a bill Wednesday to phase out the "death tax" over the next 10 years. Congress approved a similar measure last year, but President Clinton vetoed it. Supporters are optimistic that it will become law now that there is a Republican in the White House.

There is widespread disagreement on what impact elimination of the tax would have on non-profit organizations.

Several studies have suggested that bequests and other forms of charitable giving will decline by 12 percent to 31 percent if the tax is abolished. The theory is that the estate tax provides an incentive for the wealthy to give to charities to avoid taxes, so they might be less generous if they are no longer saddled with a huge tax burden.

Others suggest that charitable donations would actually increase because people would have more money to give if they aren't obligated to pay what many view as an onerous tax.

In light of such contradictory data, more research is needed before the government takes action, said Patrick Rooney, director of research at the Center on Philanthropy at Indiana University.

"I don't see an overwhelming reason to jump the gun and do something dramatically different," Rooney said.

Under current law, the Internal Revenue Service can take up to 55 percent of a family's inheritance after the head of the family dies. There is no inheritance tax on estates of less than $675,000 but more families are reaching those levels, thanks to the stock market and rising housing values.

The tax burden can be reduced through charitable contributions. Many wealthy people choose to set up private foundations or give the money to non-profits rather than handing it over to Uncle Sam.

In 1999 alone, bequests to philanthropy totaled $15.6 billion while overall charitable contributions topped $190 billion, according to the Center on Philanthropy.

Ridings said there is no doubt that abolishing the tax would affect charitable giving. The question is how significant that impact will be.

"None of us are prescient to know how significant, how large that impact will be," she said. "But I think we have enough concerns raised that we are urging caution as the Congress proceeds in dealing with them."

Richard Moyers, executive director of the Ohio Association of Non-profit Organizations, said his group also is concerned about the potential impact.

Other groups, however, are convinced their benefactors are motivated by more than tax considerations and would continue to give even if the estate tax is abolished.

"They give because of what we are doing to impact people's lives," said Carol Aquino, a spokeswoman for United Way. "Yes, the people who are eligible for a tax break certainly do get one. But we still think the majority of giving is done in a positive spirit of wanting to help accomplish something positive for a community or an organization."