Charity, Status, and Optimal Taxation: Welfarist and Non-Welfarist Approaches

Thomas Aronsson, Olof Johansson-Stenman and Ron Wendner

Journal of Political Economy Microeconomics, 2024, vol. 2, issue 4, 747 - 785

Abstract: This paper analyzes optimal taxation of charitable giving to a public good in a Mirrleesian framework with social comparisons. When there are no transaction costs of giving, charitable giving should be subsidized to such an extent that government contributions are completely crowded out, regardless of whether the government is welfarist or non-welfarist, in which case it does not acknowledge the warm glow of giving. Under welfarism, stronger concerns for relative charitable giving support lower marginal subsidies, whereas relative-consumption concerns work in the opposite direction. We also show that a simple flat-rate subsidy is optimal under welfarism, while the marginal subsidy increases in income under non-welfarism.

Date: 2024
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Related works:
Working Paper: Charity, Status, and Optimal Taxation: Welfarist and Non-Welfarist Approaches (2024)
Working Paper: Charity, Status, and Optimal Taxation: Welfarist and Non-Welfarist Approaches (2021)
Working Paper: Charity, Status, and Optimal Taxation: Welfarist and Non-Welfarist Approaches (2021)
Working Paper: Charity, Status, and Optimal Taxation: Welfarist and Non-Welfarist Approaches (2021)
Working Paper: Charity, Status, and Optimal Taxation: Welfarist and Non-Welfarist Approaches (2021)
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