Will Billionaire Tax Stimulate Giving?

Americans with wealth totaling over $100 million would be subject to at least a 20 percent tax rate if the administration’s “billionaire tax” proposal goes through. The legislation calls for paying taxes on the increase in value of unsold stocks and other liquid assets, which currently only get taxed once sold.

Since billionaires currently pay an average federal individual income tax rate of only 8.2 percent on what they sell, the bill would significantly increase their tax burden annually. While no one knows exactly how many people in the U.S. have more than $100 million net worth, a 2015 study estimated that number at about 5,000.

Ray Madoff, a Boston College tax-law professor and expert in philanthropy, predicts that if the billionaire tax passes, it could have a positive effect on charitable giving, because fewer people will want to hold on to assets that they would have to pay taxes on every year. Based on the current ambiguity of the legislation, and the likelihood it will run into some political bumps on its way to a vote, we may not know the difference it will make to nonprofits for some time.