If this were only a matter of Leona Helmsley wasting her own money, no one would need to care. But she is wasting ours too.Basically, Madoff is upset because the federal government doesn't get any of Helmsley's estate. $3.6 billion is a lot of money even for the federal government, but the government never had a legal right to the money in the first place, so get over it.
The charitable deduction constitutes a subsidy from the federal government. The government, in effect, makes itself a partner in every charitable bequest. In Mrs. Helmsley’s case, given that her fortune warranted an estate tax rate of 45 percent, her $8 billion donation for dogs is really a gift of $4.4 billion from her and $3.6 billion from you and me.
Helmsley obviously loved dogs. She loved her own dog, Trouble, enough to leave it some absurd amount of money as well. So Helmsley was clearly not just trying to evade the estate tax. She genuinely wanted to use her estate to give dogs a better life. Madoff compares the amount that Helmsley's estate would have been taxed to the amount the government spends on Head Start, which is a not-so-subtle way of disapproving of Helmsley's decision to spend her money on dogs instead of causes which Madoff deems more worthy.
Maybe my economics training has corrupted my thinking, but it seems to me that if Helmsley derived the most utility from using her money to help dogs, and spending the money on dogs generates no negative externalities, then she should be able to do it. Professor Madoff, meet Pareto efficiency.
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