Economists have long argued over whether the levy hurts economic growth by taxing savings and encouraging consumption. But there is no evidence to suggest it has had much effect on the economy. For generations, the wealthy have reduced their estates, ad thus the tax burden on their heirs, by giving to charities both before they die and as a bequest in their wills. Defenders of the levy have warned that repeal would hurt charitable institutions. But much like the debate over the economic impact, there is no clear evidence that a phaseout of the tax would hurt charities.
Studies suggest that philanthropy is driven by many factors, and the tax effect is just one.
Surprisingly, some advocates for retaining the tax, with some reforms, include those whose estates could be hit hardest. But there's a big difference between your net worth on paper and what you really have and how you live. Many supporters and foes of the tax agree at least some reform is needed, such as linking the tax-exempt limit to increases in inflation, the way income taxes are. Another popular compromise would repeal the estate tax but make heirs pay capital gains taxes on the benefactor's assets. That's the approach Congress took in the tax bill Clinton vetoed last summer.