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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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    References listed on IDEAS

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    Cited by:

    1. Caroline M. Hoxby, 2017. "The Productivity of U.S. Postsecondary Institutions," NBER Chapters,in: Productivity in Higher Education National Bureau of Economic Research, Inc.
    2. 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.
    3. James Alm & Daniel Teles, 2017. "State and Federal Tax Policy toward Nonprofit Organizations," Working Papers 1704, Tulane University, Department of Economics.

    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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