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Do Tax Incentives Affect Charitable Contributions? Evidence from Public Charitiesâ Reported Revenues

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  • Nicolas J. Duquette

Abstract

This paper estimates the effect of the charitable contribution deduction on public charities' donation revenue. The effect is identified by exploiting variation in the change in tax incentives across US states following the federal Tax Reform Act of 1986. At the margin, a one percent increase in the tax cost of giving causes charitable receipts to fall by about four percent, a larger effect than has usually been found in the literature using household data. This result does not reflect intertemporal substitution and is robust to a variety of checks. Further analysis reveals that the effect is stronger for some sectors, notably health charities, and is driven by upper-income households. Tax reform proposals limiting upper-income households' charitable contribution deduction would sharply reduce some charities' contribution revenue.

Suggested Citation

  • Nicolas J. Duquette, 2013. "Do Tax Incentives Affect Charitable Contributions? Evidence from Public Charitiesâ Reported Revenues," 2013 Papers pdu359, Job Market Papers.
  • Handle: RePEc:jmp:jm2013:pdu359
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    Cited by:

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    2. Stephan Müller & Holger A Rau, 2019. "Too cold for warm glow? Christmas-season effects in charitable giving," PLOS ONE, Public Library of Science, vol. 14(5), pages 1-13, May.
    3. Jonathan Meer & Benjamin A. Priday, 2020. "Tax Prices and Charitable Giving: Projected Changes in Donations under the 2017 Tax Cuts and Jobs Act," Tax Policy and the Economy, University of Chicago Press, vol. 34(1), pages 113-138.
    4. Meričková Beáta Mikušová & Muthová Nikoleta Jakuš, 2019. "Bounded Rationality of Individual Action in the Consumption of Public Goods," NISPAcee Journal of Public Administration and Policy, Sciendo, vol. 12(2), pages 157-194, December.
    5. Chandrayee Chatterjee & James C. Cox & Michael K. Price & Florian Rundhammer, 2020. "Robbing Peter to Pay Paul: Understanding How State Tax Credits Impact Charitable Giving," NBER Working Papers 27163, National Bureau of Economic Research, Inc.
    6. James Alm & Daniel Teles, 2018. "State and federal tax policy toward nonprofit organizations," Chapters, in: Bruce A. Seaman & Dennis R. Young (ed.), Handbook of Research on Nonprofit Economics and Management, chapter 19, pages 370-385, Edward Elgar Publishing.
    7. Joerg Paetzold, 2019. "How do taxpayers respond to a large kink? Evidence on earnings and deduction behavior from Austria," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 26(1), pages 167-197, February.
    8. Elizabeth Lyon & J. R. Catlin, 2020. "Consumer Misconceptions about Tax Laws: Results from a Survey in the United States," Journal of Consumer Policy, Springer, vol. 43(4), pages 807-828, December.
    9. Ross Hickey & Brad Minaker & A. Abigail Payne & Joanne Roberts & Justin Smith, 2019. "The Effect of Tax Price on Donations: Evidence from Canada," Melbourne Institute Working Paper Series wp2019n08, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    10. Duquette, Nicolas J., 2019. "Do share-of-income limits on tax-deductibility of charitable contributions affect giving?," Economics Letters, Elsevier, vol. 174(C), pages 1-4.
    11. Duquette, Nicolas J., 2018. "Inequality and philanthropy: High-income giving in the United States 1917–2012," Explorations in Economic History, Elsevier, vol. 70(C), pages 25-41.
    12. Jonathan Meer & Benjamin A. Priday, 2019. "Tax Prices and Charitable Giving: Projected Changes in Donations Under the 2017 TCJA," NBER Working Papers 26452, National Bureau of Economic Research, Inc.
    13. Marek Halada, 2021. "Tax, financial and macroeconomic factors of corporate giving in the context of the Czech economy [Daňové, finanční a makroekonomické faktory firemního dárcovství v podmínkách české ekonomiky]," Český finanční a účetní časopis, Prague University of Economics and Business, vol. 2021(1).
    14. Roman M. Sheremeta & Neslihan Uler, 2016. "The Impact of Taxes and Wasteful Government Spending on Giving," Working Papers 16-07, Chapman University, Economic Science Institute.
    15. Hou, Deshuai & Meng, Qingbin & Zhang, Kai & Chan, Kam C., 2019. "Motives for corporate philanthropy propensity: Does short selling matter?," International Review of Economics & Finance, Elsevier, vol. 63(C), pages 24-36.
    16. Caroline M. Hoxby, 2018. "The Productivity of US Postsecondary Institutions," NBER Chapters, in: Productivity in Higher Education, pages 31-66, National Bureau of Economic Research, Inc.
    17. Dajung Jun, 2019. "The Effects of the Dependent Health Insurance Coverage Mandates on Fathers’ Job Mobility and Compensation," Melbourne Institute Working Paper Series wp2019n09, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    18. Duquette, Nicolas J. & Hargaden, Enda P., 2021. "Inequality and giving," Journal of Economic Behavior & Organization, Elsevier, vol. 186(C), pages 189-200.
    19. Caroline Graf & Eva-Maria Merz & Bianca Suanet & Pamala Wiepking, 2021. "Social Norms Offer Explanation for Inconsistent Effects of Incentives on Prosocial Behavior," Papers 2104.13652, arXiv.org.
    20. Duquette, Nicolas J. & Ohrn, Eric C., 2018. "Corporate charitable foundations, executive entrenchment, and shareholder distributions," Journal of Economic Behavior & Organization, Elsevier, vol. 152(C), pages 235-253.
    21. Müller, Stephan & Rau, Holger A., 2018. "Motivational crowding out effects in charitable giving: Experimental evidence," Center for European, Governance and Economic Development Research Discussion Papers 338, University of Goettingen, Department of Economics.
    22. Müller, Stephan & Rau, Holger A., 2020. "Motivational crowding out effects in charitable giving: Experimental evidence," Journal of Economic Psychology, Elsevier, vol. 76(C).
    23. YoungRok Kim, 2021. "Politics, Religion, and Tax Incentives for Charitable Giving in South Korea," Korean Economic Review, Korean Economic Association, vol. 37, pages 141-155.
    24. Roman M. Sheremeta & Neslihan Uler, 2021. "The impact of taxes and wasteful government spending on giving," Experimental Economics, Springer;Economic Science Association, vol. 24(2), pages 355-386, June.
    25. Chandrayee Chatterjee & James C. Cox & Michael K. Price & Florian Rundhammer, 2020. "Competition Among Charities: Field Experimental Evidence from a State Income Tax Credit for Charitable Giving," Experimental Economics Center Working Paper Series 2020-01, Experimental Economics Center, Andrew Young School of Policy Studies, Georgia State University.

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    More about this item

    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
    • L30 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - General

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