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The Impact of Tax Reform on Charitable Giving: A 1989 Perspective

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  • Charles T. Clotfelter

Abstract

The purpose of this paper is to examine the predicted effects of tax reform in the 1980s (the tax acts of 1981 and 1986) on charitable contributions by individuals and to compare them to the actual and apparent effects, viewed from the perspective of 1989. The paper discusses what the economic models can and cannot be expected to do. Then, using published data from tax returns, the paper compares actual and predicted changes in giving as a result of both of the major tax reform acts. The paper concludes that the changes in contributions are quite consistent with the economic model of giving. As a result of these tax changes, average giving in high income classes declined. These results imply that tax policy should continue to be considered one important determinant of the level of individual charitable contributions.

Suggested Citation

  • Charles T. Clotfelter, 1990. "The Impact of Tax Reform on Charitable Giving: A 1989 Perspective," NBER Working Papers 3273, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:3273
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    1. Don Fullerton, 1991. "Tax Policy Toward Art Museums," NBER Chapters, in: The Economics of Art Museums, pages 195-236, National Bureau of Economic Research, Inc.
    2. Glenday, Graham & Gupta, Anil K & Pawlak, Henry, 1986. "Tax Incentives for Personal Charitable Contributions," The Review of Economics and Statistics, MIT Press, vol. 68(4), pages 688-693, November.
    3. Slemrod, Joel, 1989. "Are Estimated Tax Elasticities Really Just Tax Evasion Elasticities? The Case of Charitable Contributions," The Review of Economics and Statistics, MIT Press, vol. 71(3), pages 517-522, August.
    4. Charles T. Clotfelter, 1985. "The effect of tax simplification on educational and charitable organizations," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 29, pages 187-221.
    5. Feldstein, Martin S & Taylor, Amy, 1976. "The Income Tax and Charitable Contributions," Econometrica, Econometric Society, vol. 44(6), pages 1201-1222, November.
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    Cited by:

    1. Ribar, David C. & Wilhelm, Mark O., 1995. "Charitable Contributions to International Relief and Development," National Tax Journal, National Tax Association;National Tax Journal, vol. 48(2), pages 229-244, June.
    2. James Andreoni, 1998. "Toward a Theory of Charitable Fund-Raising," Journal of Political Economy, University of Chicago Press, vol. 106(6), pages 1186-1213, December.
    3. Yörük Bariş K., 2015. "Do Charitable Subsidies Crowd Out Political Giving? The Missing Link between Charitable and Political Contributions," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 15(1), pages 407-435, January.
    4. Margaret E. Brehm, 2018. "The Effects of Federal Adoption Incentive Awards for Older Children on Adoptions From U.S. Foster Care," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 37(2), pages 301-330, March.
    5. Sanjit Dhami & Ali al-Nowaihi, 2011. "Competitive Charitable Giving and Optimal Public Policy with Multiple Equilibria," Discussion Papers in Economics 11/37, Division of Economics, School of Business, University of Leicester.
    6. John A. List, 2011. "The Market for Charitable Giving," Journal of Economic Perspectives, American Economic Association, vol. 25(2), pages 157-180, Spring.
    7. Perroni, Carlo & Scharf, Kimberley & Talavera, Oleksandr & Vi, Linh, 2022. "Does online salience predict charitable giving? Evidence from SMS text donations," Journal of Economic Behavior & Organization, Elsevier, vol. 197(C), pages 134-149.
    8. 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.
    9. V. Kerry Smith & Sharon L. Harlan & Michael McLaen & Jacob Fishman & Carlos Valcarcel & Marcia Nation, 2015. "Compassion or Cash: Evaluating Survey Response Incentives and Valuing Public Goods," NBER Working Papers 21288, National Bureau of Economic Research, Inc.
    10. Ackerman, Deena & Auten, Gerald, 2011. "Tax Expenditures for Noncash Charitable Contributions," National Tax Journal, National Tax Association;National Tax Journal, vol. 64(2), pages 651-687, June.
    11. de Bartolome, Charles A. M., 1995. "Which tax rate do people use: Average or marginal?," Journal of Public Economics, Elsevier, vol. 56(1), pages 79-96, January.
    12. Perroni, Carlo & Scharf, Kimberley & Talavera, Oleksandr & Vi, Linh, 2021. "Online Salience and Charitable Giving: Evidence from SMS Donations," CAGE Online Working Paper Series 536, Competitive Advantage in the Global Economy (CAGE).
    13. Barış K. Yörük, 2013. "The Impact of Charitable Subsidies on Religious Giving and Attendance: Evidence from Panel Data," The Review of Economics and Statistics, MIT Press, vol. 95(5), pages 1708-1721, December.
    14. Giedre Lideikyte Huber & Marta Pittavino, 2022. "Who donates and how? New evidence on the tax incentives in the canton of Geneva, Switzerland," Journal of Empirical Legal Studies, John Wiley & Sons, vol. 19(3), pages 758-797, September.
    15. Cordes, Joseph J., 2011. "Re-Thinking the Deduction for Charitable Contributions: Evaluating the Effects of Deficit-Reduction Proposals," National Tax Journal, National Tax Association;National Tax Journal, vol. 64(4), pages 1001-1024, December.
    16. Whitaker, Amy & Kräussl, Roman, 2023. "Art collectors as venture capitalists," CFS Working Paper Series 696, Center for Financial Studies (CFS).
    17. Baris Yoruk, 2013. "Are Generous People More Likely to Vote?," Discussion Papers 13-10, University at Albany, SUNY, Department of Economics.
    18. Neslihan Uler, 2011. "Public goods provision, inequality and taxes," Experimental Economics, Springer;Economic Science Association, vol. 14(3), pages 287-306, September.
    19. Uler, Neslihan, 2009. "Public goods provision and redistributive taxation," Journal of Public Economics, Elsevier, vol. 93(3-4), pages 440-453, April.
    20. Sanjit Dhami & Ali al-Nowaihi, 2012. "Philanthropy, multiple equilibria and optimal public policy," Discussion Papers in Economics 12/08, Division of Economics, School of Business, University of Leicester.

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