Although art museums do not pay any substantial taxes, they are
greatly affected by various U.S. tax rules. The individual receives a
deduction for donations of art to museums, the estate gets a deduction
for bequests, and the corporation gets a deduction for charitable gifts.
Art musewns also are not taxed on investment income or on some "related"
business activities. This paper reviews the logic for these rules and
discusses their economic effects.
In combination, this set of tax provisions is found to have a tax
expenditure that is larger than direct federal expenditures on art
museums in the U.S. The amount of this tax expenditure or implicit
subsidy has been falling in recent years because of reductions in the
marginal personal income tax rates at which individuals deduct gifts.
High income taxpayers are found to be the most responsive to
marginal tax rates, and they also tend to give the largest amounts to
the arts. Therefore the level of the top personal marginal tax rate is
particularly important to art museums. Simulations here suggest that
the personal marginal rate reduction in the Tax Reform Act of 1986 could
reduce gifts to the arts by as much as 24 percent.
*Published: This paper was subsequently published as Tax Policy Toward Art Museums, Don Fullerton, in NBER book The Economics of Art Museums (1991)
You may purchase this paper on-line in .pdf format
from SSRN.com ($5) for electronic delivery.
Machine-readable bibliographic record -
MARC,
RIS,
BibTeX
