I was interested by Prewitt’s (2006) passage related to the question of whether higher estate taxes could “more radically transfer wealth from the very rich to the very poor than by [wealthy individuals] parking it in tax-exempt foundations with their 5 percent payout policies” (p. 362). In the U.S., I think there is a tendency for people to get angered at the idea of the government having control over their money when they die (as exemplified in an undergraduate personal finance class that I took in which our professor explained what to do in order to ensure that the least amount of our money will go to the government when we die as legally possible). Donating to a foundation allows wealthy individuals to control how their wealth is distributed to a greater degree than they would be able to if a larger proportion of their wealth was obtained by the public sector through taxes. However, as foundations are only required to distribute 5 percent of their assets each year, the wealth of individuals may serve the poor more effectively if it was distributed in larger amounts to the public through government-funded services than if it is distributed through foundations (or so Prewitt (2006) implies).
I think that it would be interesting if a study was conducted to examine the differences in the distribution of wealth to the poor through higher estate taxes versus donations to foundations, as Prewitt (2006) deems important. What is your opinion on how effective higher estate taxes would be in “radically [transferring] wealth from the very rich to the very poor”?
The issue you raise is a source of a very active debate in policy circles. Many worry, as I noted in another post, that the tax deductions that go along with the creation of foundations create an indirect government subsidy of foundation work. Those who worry about this issue, argue that this approach allows wealthy individuals to make funding decisions about otherwise public resources, in that way privileging some issue areas over others. I wrote an opinion piece of sorts about this topic for the National Council on Responsive Philanthropy that I would be happy to share if you're interested.
ReplyDeleteI would be interested to read what you wrote, Professor Campbell!
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