Is Charitable Giving by Nonitemizers Responsive to Tax Incentives? New Evidence

Abstract

Was nonitemizer giving responsive to the 1982-6 "above-the-line" tax deduction provided for in the 1981 Economic Recovery Tax Act? Here, a Tobit model is applied to Treasury Individual Tax Model file data for 1985 and 1986 to estimate the price elasticity of nonitemizer giving. Nonitemizer giving is found to be price-responsive. The responsiveness is, however, smaller than that for itemizer giving (at least for 1986 when the nonitemizer deduction was fully phased in), suggesting diminishing returns from extending the itemizers-only deduction to nonitemizers. These findings also question whether the nonitemizer deduction can be touted as a highly efficient tax subsidy.

Who gives? A literature review of predictors of charitable giving Part One: Religion, education, age and socialisation

“…The typical finding about the relationship of age with philanthropy in the literature is that it is positive (Alpizar, Carlsson, & Johansson-Stenman, 2008;Apinunmahakul & Devlin, 2004;Auten, Cilke, & Randolph, 1992;Auten & Rudney, 1990;Banks & Tanner, 1999;Bekkers, 2003Bekkers, , 2006bBekkers & Schuyt, 2008;Bekkers & Wiepking, 2006;Belfield & Beney, 2000;Boskin & Feldstein, 1977;Bristol, 1990;Brooks, 2002;E. Brown & Lankford, 1992;Bryant, et al, 2003;Carman, 2006;Carroll, et al, 2006;Chang, 2005;Choe & Jeong, 1993;Chua & Wong, 1999;Clotfelter, 1980;Duquette, 1999;Eaton, 2001;Eckel & Grossman, 2003;Eckel, et al, 2005;Eschholz & Van Slyke, 2002;Farmer & Fedor, 2001;Feenberg, 1987;Feldstein & Taylor, 1976;Frey & Meier, 2004aGreenwood, 1993;Hoge & Yang, 1994;Houston, 2006;Jones & Posnett, 1991a, 1991bKingma, 1989;Lankford & Wyckoff, 1991;List, 2004;Long, 2000;…”

A Literature Review of Empirical Studies of Philanthropy

“…But those religiously affiliated in Canada itemize rarely (Kitchen, 1992). Nonitemizers are less sensitive to changes in tax price (Duquette, 1999;Eaton, 2001). One reason may be that they don't know about the deduction (McGregor-Lowndes, Newton, & Marsden, 2006).…”

“…Married males are found to be more sensitive to the price of giving than married females (Andreoni & Payne, 2003). Price effects usually increase with income (G. E. Auten, Cilke, & Randolph, 1992;Duquette, 1999;Feldstein & Taylor, 1976;O'Neill, Steinberg, & Thompson, 1996;Robinson, 1990); some studies find that among the highest income groups price effects decline again (Boskin & Feldstein, 1977;Feldstein, 1975a;Taussig, 1967). A study of philanthropy in Singapore found that the tax price effect declined with education (Chua & Wong, 1999).…”

Tax Effects on Charitable Giving in the Presence of Uncertainty

“…Actual disposable income Y. AGI alone cannot accurately forecast pretax income. To make the variable comparable to previous studies, pretax income equals AGI plus certain forms of income, including pension income, Social Security income, unemployment compensation, and individual retirement account (IRA) and Keogh plan distributions (Duquette 1999). This pretax income is then reduced by total federal income taxes, assuming there were no contributions to make disposable income exogenous to charitable giving.…”