Why the Buffett-Gates Giving Pledge Requires Limitation of the Estate Tax Charitable Deduction

36 Pages Posted: 16 Nov 2014 Last revised: 3 Dec 2014

See all articles by Edward A. Zelinsky

Edward A. Zelinsky

Yeshiva University - Benjamin N. Cardozo School of Law

Date Written: November 15, 2014

Abstract

The Buffett-Gates Giving Pledge, under which wealthy individuals promise to leave a majority of their assets to charity, is an admirable effort to encourage philanthropy. However, the Pledge requires us to confront the paradox that the federal estate tax charitable deduction is unlimited while the federal income tax charitable deduction is capped. If a Giving Pledger leaves his wealth to charity, the federal fisc loses significant revenue since the Pledger thereby avoids federal estate taxation as charitable bequests are deductible without limit for federal estate tax purposes. Despite its laudable qualities, the Giving Pledge is a systematic (albeit inadvertent) threat to the estate tax base.

The Giving Pledge requires the amendment of the federal estate tax to restrict an estate’s charitable deduction to a percentage of the estate, just as the income tax charitable deduction is limited to a percentage of the taxpayer’s income. In this fashion, the sensible compromise embedded in the income tax charitable deduction would be carried over to the federal estate tax to simultaneously encourage charitable giving while ensuring that all large estates pay some federal estate tax.

The Giving Pledge need not be the death knell of the estate tax. It should instead be the catalyst to reform the tax by limiting the estate tax charitable deduction.

Keywords: Warren Buffett, Bill Gates, Giving Pledge, estate tax, income tax, charitable deduction

JEL Classification: K34

Suggested Citation

Zelinsky, Edward A., Why the Buffett-Gates Giving Pledge Requires Limitation of the Estate Tax Charitable Deduction (November 15, 2014). Florida Tax Review, Vol. 16, No. 7, 2014; Cardozo Legal Studies Research Paper No. 443. Available at SSRN: https://ssrn.com/abstract=2524765

Edward A. Zelinsky (Contact Author)

Yeshiva University - Benjamin N. Cardozo School of Law ( email )

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New York, NY 10003
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212-790-0277 (Phone)

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