Would Americans Make Charitable Donations Without Tax Incentives?
Tax incentives may not be as vitally important to giving as researchers and policymakers originally thought. Classic studies on how changes in tax incentives impact donors’ giving in the following year found rather substantial effects: A 50 percent increase in the price of a donation – that is, the amount of money donors give minus the amount they receive as income tax deductions – decreased donations by up to 125 percent.1 These short-term studies, however, failed to take into account the fact that donors often return to their original levels of giving once they get used to new tax laws. More recent studies that take a longer view find that tax incentives play a smaller role in motivating charitable donations, with a 50 percent increase in the price of donations decreasing charitable contributions over the next two to three years by as little as 25 percent.2 How much tax incentives matter also depends on who donors are. High-income donors seem to be more responsive to tax incentives t
