Going to the Dogs

In a recent New York Times op-ed piece, Boston College law professor Ray Madoff explains how we're all footing the bill for Leona Helmsley's $8 billion bequest to the world's canines: Nearly half that money is rightfully the U.S. government's, since Helmsley's estate would be taxed at a rate of 45 percent had she not devoted it to charity. "The charitable deduction constitutes a subsidy from the federal government," Madoff writes. "In Mrs. Helmsley's case…her $8 billion donation for dogs is really a gift of $4.4 billion from her and $3.6 billion from you and me."

Really? By Madoff's logic, every charitable donation for which someone, living or dead, receives a deduction is partly "a gift…from you and me." So is every child, home mortgage, adoption, medical expense, and student loan that reduces anyone's tax bill. Unlike Madoff, who wants to change the rules for charitable bequests to make sure the money goes to "good causes," I don't think the tax code should be used for social engineering. But as long as it is, people who take advantage of deductions aimed at encouraging certain kinds of behavior are accepting a "subsidy" in Madoff's sense—i.e., keeping more of their own money than they otherwise would get to keep.

The deduction-equals-subsidy argument is actually weaker in the case of Helmsley's bequest than it is for the average itemizing taxpayer, since the money that's going to the dogs has already been taxed. Madoff is complaining that failing to tax it again is unfair to the rest of us, at least as long as the money is supporting a cause he doesn't like.