Reply to Comments on Billionaires--Posner

There were a number of interesting comments. I cannot reply to all of them, but I will reply to a few. One comment was that "wealthy private donors often take an interest in the results they are purchasing with their donations. Few would argue that government is equally demanding with its funds. Thus, an increase in government spending to replace charitable donations seems counter productive." I do not agree. The reason is that charitable foundations are perpetual, and are controlled by self-perpetuating boards of trustees. As a result, the original donors do not control a foundation. There is thus less monitoring of foundations than there is of government programs. Another comment questions how eliminating charitable deductions from the estate tax would generate much tax revenue. "People will simply give whatever money they had otherwise intended to charity while they are still alive, noting they don't need tax deductions to do so." This might be largely true if there were no gift tax (it would not be completely true because, not knowing when they die or what their future expenses will be, people are reluctant to give away almost all their money before they die). There is and must be a gift tax to back up the estate tax. The same commenter said that I am "radically underestimating the incentive effects of giving to one's offspring. Assume you can close all the 'loopholes' permanently and it is impossible to give one's wealth to one’s children (what a hideous thought) after death or while alive, then I assure you an awful lot of our most prolific job creators would either retire or stop being workaholics and instead take time out to smell the roses." This comment conflates closing loopholes with confiscatory tax rates. Even if there were no deductions, an estate tax of less than 100 percent would allow people who accumulated an estate to pass some of the money in the estate to their children or others, including charities. Another commenter makes the following good point in defense of the estate tax: "Most of the wealth of these billionaires is not from income and has not been taxed, e.g. Balmer has not sold and rebought his Microsoft stock on which to pay capital gains, but has held it and his wealth is from appreciation that has not been taxed. So the estate taxes, for the most part, are taxes on money as it passed to heirs that has not yet been taxed.” When the heirs sell the stock, moreover, they pay income tax only on the difference between the value of the stock at the time of the donor's death and its current value, so that the appreciation in stock value during the donor's life is never taxed. Finally, one unrelated and very strange comment: "I take great offense at your recent statements that all Muslims in America should be under surveillance." Neither recently nor ever have I made such a suggestion.

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