The philanthropic community could be among the most anguished mourners if, as a few presidential candidates have proposed, the unavoidable twins of death and taxes are decoupled.
Federal taxes on the estates of the very wealthy take away more than half of the assets if they are not earmarked for charity. Some candidates, worried about estate taxes that can, for example, cripple a younger generation's hopes of taking over a business or farm from parents, are proposing to eliminate them.
Among Republican hopefuls, those pushing abolition include Steve Forbes and John McCain. Forbes, who says his 17 percent flat-tax proposal and generous personal exemptions would increase giving, would also scrap charitable deductions taken during one's life.
George W. Bush plans to announce a comprehensive tax plan today that includes phasing out the estate tax over eight years. But he has also vowed to expand charitable deductions during one's lifetime, especially for donations to groups fighting poverty.
Among Democrats, Al Gore has called for targeted tinkering, including an increase in estate tax deductions for the transfer of private land near cities, parks and wilderness for conservation purposes. Bill Bradley has expressed reservations about the more dramatic estate tax proposals.
The Reform Party's Patrick J. Buchanan would abolish taxes on estates of less than $5 million. Donald Trump has vowed to take a second look at the estate tax in return for a one-time wealth tax of 20 percent on those worth more than $10 million.
But while the candidates draw their lines in the sand, it's not clear just how a change on estate taxes would affect giving.
"Most people would say there's some risk" to charities if the tax is eliminated, says Eugene Tempel, executive director of the Indiana University Center on Philanthropy. However, he stresses, a reasonable argument can be made that philanthropy will benefit. While people might be less inclined to give away some of their money if they know it won't otherwise be taxed, argues Tempel, their heirs would inherit more and have more to donate.
"There are people within the foundation world on both sides," says Matthew W. Hamill, vice president for public policy at Independent Sector, a consortium of nonprofit groups. "At the moment, we don't have enough research."
But the possible effect on bequests is not the only concern for charities. Current giving may also be affected.
The estate tax, Tempel says, may "act as kind of a dam that pushes large-estate giving into the present." In short, the argument goes, donors want to give now if they know that at death the government will take it away. He notes that the number of foundations set up by individuals has risen in the 1990s, from 42,000 to 66,000.
BIG GIVERS: Donors in this country made 469 gifts of more than $1 million each to foundations or other nonprofit institutions in the third quarter of this year, Tempel's center reports. Fifteen years ago, about that many high-end donations were reported for the entire year.
The top recipient among local beneficiaries was the Smithsonian Institution, which reported two gifts of $60 million each: New Jersey psychologist Paul Singer donated to the Arthur M. Sackler Gallery; Hungarian American businessman Steven F. Udvar-Hazy gave for the new air and space complex near Dulles Airport.
NONPROFIT PAY: Pay is up for nonprofit executives. A survey by the Council on Foundations has found that the median salary for chief executives at private foundations has increased 13.9 percent in inflation-adjusted dollars since 1994. The median salary among executives at 667 nonprofits and corporate giving programs surveyed was $85,000 in 1998. Ironically, the rise came during the period when new rules were adopted giving the Internal Revenue Service more leeway in sanctioning nonprofits or employees for, among other indiscretions, inordinately high compensation.
The "intermediate sanctions" rules were adopted by Congress in 1996 in light of scandals such as the one that damaged United Way of America when its chief, William Aramony, was found living the high life on the donors' tab. In the past, the IRS had been caught in a no-middle-ground bind when abuses occurred, forced either to do nothing or to try to take away the group's tax-exempt status. But along with the new sanctions policy, the IRS is establishing pay standards based in part on comparable wages in the profit-making sector, where compensation has dramatically increased among executives.
Sara Melendez, president of Independent Sector, which backs the intermediate sanctions rules, says a nonprofit should not necessarily be faulted for one person's transgressions. She stresses that her group has not taken a position on the new IRS pay standards.
Melendez says "many in the [nonprofit] sector were uncomfortable when the IRS allowed for-profits to be used" for comparative purposes. But she adds, "I don't think anybody would want salary constraints to prevent hiring the best people."
Kent Allen's e-mail address is firstname.lastname@example.org.