Yesterday’s New York Times carried an op-ed piece by Professor Ray D. Madoff  of Boston College Law School criticizing the tax policy that provides a charitable deduction, and therefore a government subsidy, for Leona Helmsley’s  $8 billion trust for the care of dogs.  

Ms. Madoff points out:

" While some choose to contribute to broad public goals, the law does not require it. In recent years, charitable status has been recognized for organizations with purposes as idiosyncratic as promoting excellence in quilting and educating the public about Huey military aircraft."

                                                                                                                                             Leona Helmsley and Trouble

The policy issues are similar to those involved in the discussion of huge endowments, see our prior post on Harvard’s tax exemption for its mega-endowment.

As a tax policy matter, the charitable deduction, for income tax as well as estate and gift tax, is intended to promote giving to charities to relie the burdens of government and to provide a public benefit.   As is often the case with tax incentives, taxpayers take the incentive ball and run with it – often to extreme ends.  Professor Madoof points out, quite rightly, in my opinion, that it is time to reassess this tax incentive when it results in $ 8 billion in assets being exempted from the estate tax:  

"In Mrs. Helmsley’s case, given that her fortune warranted an estate tax rate of 45 percent, her $8 billion donation for dogs is really a gift of $4.4 billion from her and $3.6 billion from you and me.
To put it in perspective, our contribution to Mrs. Helmsley’s cause equals approximately half of what we spend on Head Start, a program that benefits 900,000 children."

Blogging credit goes to Professor Paul Caron Associate Dean of Faculty, Charles Hartsock Professor of Law, University of Cincinnati College of Law.  Read his take here.  Blogging credit also to Linda L. Beale, Associate Professor at Wayne State University Law School.  Click here to read her post.