Tax Policy and Giving

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    Identifying Tax Effects on Charitable Giving
    (12/5/2007) Wilhelm, Mark Ottoni; Hungerman, Daniel M.
    This paper estimates the effects of three federal tax acts—the Economic Growth and Tax Relief Reconciliation Act of 2001 (H.R. 1836), the Jobs and Growth Tax Relief Reconciliation Act of 2003 (H.R. 2), and the Working Families Tax Relief Act of 2004 (H.R. 1308)—on charitable giving, and offers four extensions relative to previous work. First, we use new data—the Center on Philanthropy Panel Study, the philanthropy module in the Panel Study of Income Dynamics—that permit the estimation of the effect of switches in itemization status on giving. This is important because switches permit a direct answer to the question: How much of an increase in charitable giving is caused by tax deductibility? Second, the new data permit the estimation of tax effects on charitable giving to secular charities as well as to religious organizations. This is important because the main policy question in the literature on taxes and giving is to evaluate “treasury efficiency”—whether the Treasury can cause more money to flow to charitable organizations by allowing deductibility of giving than by eliminating deductibility and sending the increased tax revenue directly to charitable organizations. By using secular giving, we can focus on the type of giving most relevant to this policy question. Third, the new data allow for improved methodological approaches over past studies. Fourth, we argue that the 2001, 2003, and 2004 federal tax acts were timed such that they provide a set of tax changes suitable for identifying permanent effects of taxes on giving. The estimates based on the analysis of families who switch itemization status suggest that secular giving is price elastic, implying that treasury efficiency holds. In contrast, estimates which impose the restrictions facing other datasets suggest a statistically insignificant price elasticity.
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    How Changes in Tax Rates Might Affect Itemized Charitable Deductions
    (2009-03) IU Lilly Family School of Philanthropy
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    Impact of The Obama Administration’s Proposed Tax Policy Changes on Itemized Charitable Giving
    (2011-10) Rooney, Patrick; Osili, Una; Bhakta, Reema; Raghavan, Sindhu; Davis Kalugyer, Adriene; Hyatte, Cynthia
    As the United States addresses economic challenges following a deep recession, both President Obama and Congress are considering new tax policies to stimulate economic growth and reduce the federal government’s budget deficit. These measures will impact a wide array of individual economic decisions, including individual decisions regarding what households do with disposable income. One such area where changes in federal tax policy can have a substantial influence on individual decisions is the choice of an individual or household to engage in charitable giving.
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    Tax Policy and Charitable Giving Results
    (2017-05-18) Rooney, Patrick; Osili, Una; Kou, Xianon; Zarins, Sasha; Bergdoll, Jonathan
    This study used the Philanthropy Panel Study (PPS), which is the only panel study of philanthropy in America, and data from the Panel Study of Income Dynamics (PSID), which is the largest and longest running panel study in the world. The PSID has a rich array of data for over 9,000 households, including, income, wealth, marital status, existence and number of children, etc. We know from prior research that these variables play an important role in explaining and predicting giving patterns, and they are not all available in other datasets used for this type of research. Using this data, Indiana University’s estimates suggest that it is important to consider where tax payers are responsive to changes in charitable giving incentives. However, because there is still significant debate with regards to the responsiveness of charitable giving to changes in tax policy (see pages 11-15 for a discussion on tax-price elasticity of charitable giving), analyses of each proposal were also conducted using the commonly used elasticities: less responsive, -0.5 & moderately responsive, -1.0.
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    Charitable Giving and Tax Incentives
    (2019-06-03) Osili, Una; Rooney, Patrick; Zarins, Sasha
    Over $400 billion were donated to nonprofits in 2017, a record high. However, despite the increases in charitable dollars, the share of households that donate has been declining: in 2000, 67 percent of American households donated to nonprofits, but in 2014, only 56 percent of American households donated. This trend in decreasing donors pre-dates the passage of the 2017 Tax Cuts and Jobs Act (TCJA), but could be accelerated by the recent policy changes. TCJA significantly changed federal tax policy and these changes are expected to affect charitable giving [3-5]. Nonprofit leaders, as well as policymakers, have been exploring additional policy proposals to offset the potential negative impact on charitable giving.
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    Tax Incentives for Charitable Giving: New Findings from the TCJA
    (Indiana University Lilly Family School of Philanthropy, 2024-07-29) Han, Xiao; Hungerman, Daniel M.; Ottoni-Wilhelm, Mark
    The Tax Cuts and Jobs Act eliminated federal charitable giving incentives for roughly 20 percent of US income-tax payers. We study the impact of this on giving. Basic theory and our empirical results suggest heterogeneous effects for taxpayers with different amounts of itemizable expenses. Overall, the reform decreased charitable giving by about $20 billion annually. Using a new method to adjust estimates for retimed giving, we find evidence of moderate intertemporal shifts from pre-announcement of the law. The permanent price elasticity of giving estimates range from .6 for the average donor to over 2 for those predicted to be most responsive to the reform.