This 1987 study still provides some of the most comprehensive data on charitable giving by the wealthy. Giving by top wealthholders at death tends to be much larger than annual giving during life, wealth has only a limited effect on lifetime giving, and giving is more correlated with realized than with economic income. The last conclusion implies that tax incentives to avoid realizing income tend to reduce giving. Also, that top wealthholders often forego available tax saving demonstrates both a lack of planning and the extent to which they gain psychic benefits from wealthholding itself.
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Although a fair amount of research has been done on the relationship of charitable giving to individual income, much less is known about the relationship of giving to wealth.1 Few data are available on the charitable donations of the wealthy, especially the relationship of their lifetime giving to giving via bequest. The combined patterns of lifetime giving and bequests reveal some of the motivations behind individual charitable activity, especially by those who held significant wealth at the time of their death.
This study examines patterns of giving among wealthy individuals. The principal data are a sample of 4,143 estate tax returns filed in 1977 (for deaths generally in 1976 and 1977), matched with the income tax returns of decedents in years just prior to death, from 1974 through 1976. Each estate generally had assets worth $60,000 or more ($120,000 or more for decedents dying in 1977).
The 4,143 estate tax returns used for this study constitute 1 out of 10 of the more than 41,000 returns used in Statistics of Income—Estate Tax Returns (U.S. Department of the Treasury, Internal Revenue Service, 1979) and for related wealth studies (Schwartz, 1983). In many cases, however, matching income tax returns could not be found or were not filed for these decedents. In addition, since information on charitable giving during life was to be examined, only returns filed by itemizers were often useful. This study, therefore, usually focused attention on those decedents from whom there was available income tax information from the year prior to death or on perosns in this latter group who actually itemized.
Under ideal conditions, one would want to examine a data set that was free of measurement errors, possible sample selection bias, and similar statistical problems. Unfortunately, no such data on wealthholders exist. Instead, capital income reported on income tax returns or in surveys is poorly measured, perhaps much worse than wealth reported on estate tax returns. The data used in this study also have several limitations. First, accounting for wealth takes place in a period different from that in which income tax returns are filed. Charitable giving in one year is thus compared to wealthholdings in the following year (at the time of death). Wealth transfers, consumption out of wealth, or wealth accumulation out of income could have occurred between the points at which measurements were made. Moreover, charitable giving in the year prior to death may be atypical.
For tax accounting reasons, wealth is also likely to be understated. Valuations for estate tax purposes are typically low for reported assets, especially businesses, farms, houses, and other non-liquid or infrequently traded assets. Estimates must be reasonable, but there is a strong incentive to provide the lowest among available choices. In addition, much wealth from life insurance or pensions does not pass through estates, so estimates of value of estates and inheritances are often understated. finally, estate tax returns reveal only the wealth of decedent; in cases where comparisons are made with income tax returns of joint filers, the wealth (and charitable bequests) of only one spouse contrasted withe the annual lifetime charitable giving of bothe spouses.2
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