Working Paper: NBER ID: w26452
Authors: Jonathan Meer; Benjamin A. Priday
Abstract: We estimate the tax price elasticity of charitable giving using newly-available data from the Panel Study of Income Dynamics spanning 2001-2017. We find that households that always itemize are less sensitive to changes in the tax treatment of donations than house-holds that switch itemizing status. We apply these results to the provisions of the Tax Cut and Jobs Act of 2017, taking into account the marginal propensity to donate from the increase in disposable income expected for most households, and predict significant reductions in charitable giving.
Keywords: Charitable Giving; Tax Price Elasticity; Tax Cuts and Jobs Act
JEL Codes: D64; H24; H41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Tax price increase (H29) | Reduction in likelihood of making any donation (D64) |
| Tax price increase (H29) | Reduction in amount given, conditional on giving (D64) |
| Tax price increase (H29) | Reduction in charitable giving (D64) |
| Increase in income (E25) | Increase in donations (D64) |
| Tax price increase (H29) | Charitable giving responsiveness (D64) |
| Switching itemizing status (C34) | Sensitivity to tax price changes (H31) |