Tax Policy and Philanthropy: A Primer on the Evidence for the U.S. and its Implications

Jon Bakija

No 2013-01, Department of Economics Working Papers from Department of Economics, Williams College

Abstract: Tax policies in the U.S. increase the incentive to donate to charity among those who itemize their deductions, and most of the tax revenue cost goes to subsidize donations made by relatively high-income people. Several types of empirical evidence which I review here suggest that the donation behavior of high-income people in particular is probably rather responsive to these tax incentives. Economic theory helps clarify what factors affect the optimal tax subsidy for charitable giving, and I summarize some of the key insights. Among other things, the theory suggests that the optimal subsidy is likely to be higher when donation behavior is more responsive to tax incentives, but this is just one important piece of a larger puzzle.

Keywords: charitable donations; incentive effects of taxation (search for similar items in EconPapers)
JEL-codes: D12 H24 H31 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2013-06
New Economics Papers: this item is included in nep-pbe and nep-pub
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Forthcoming in Social Research, Vol. 80 No. 2 (Summer 2013), www.socres.org.

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