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From the Chairman
Maybe Senator Grassley is right. I believe that taxpayers have the right to reduce their taxes as much as possible within the framework of the Internal Revenue Code. Having attended law school at the center of the law and economics universe, the University of Chicago, I also like to think that I believe in rationality and fundamental fairness.
So what has this got to do with Senator Grassley? Much has been written in the art world lately about the near-death of the partial gift, and most people blame Senator Grassley for putting this tax break into intensive care. Museum directors and others around the country are saying that the partial gift is now so burdensome that no donor of sound mind would consider a partial gift of artwork under the new rules.
Perhaps the museum directors are right, but at the risk of coming under fire from my fellow art collectors, philanthropists, and arts organization executives and board members, I’m going to posit that maybe they’re not, or that it doesn’t matter. Maybe Senator Grassley is right.
The Code is nearly 12 million words long. To put that in perspective, Lincoln’s Gettysburg Address was 272 words; the Declaration of Independence some 1,300 words; and the Bible, which spans several thousand years of human history, approximately 773,000 words.
The Code’s length and complexity are caused in part by the litany of special interests and strange, if not perverse, incentives written into it. In a perfect world, before adopting tax breaks for particular groups, we would first ask whether the incentive and resulting outcome were desirable, fundamentally fair, and equitable. In the case of the partial gift rules, one could argue that these questions were never asked.
The mortgage interest deduction exists because economists believe that it will encourage home ownership (a method of savings) beneficial to U.S. economic health. Charitable donation deductions exist because everyone can agree that such deductions encourage desirable behavior. These are mostly equitable concepts. The partial gift rules are not.
If a donor is considering a gift of a substantially appreciated artwork to a museum, the curtailment of the partial gift rules might affect the timing of that decision but it is unlikely to affect the ultimate outcome. Faced with the prospect of a large capital gain or a large charitable deduction, will these rules change the donor’s appetite for paying, rather than reducing, taxes? Will scores of artworks remain out of the public realm and out of the reach of museums? The statistics suggest not.
Furthermore, is it fundamentally fair that I can make a partial or outright gift of a valuable artwork and receive a deduction for the full, or increasing, value of the work, while the artist can make the same outright gift and receive a deduction only for the value of the materials used?
Another statistic states that the Code is now about 12 times the length of Shakespeare’s complete works. As such, for the sake of argument, I would suggest that the upset over the curtailment of the partial gift rules is much ado about nothing.
Chairman, ISC Board of Directors
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