Q: Is there any evidence that changes to the tax laws in the USA changed end of year giving behaviors? Previously, ~30% of US taxpayers filed itemized tax returns allowing them to receive a deduction for charitable giving. Tax law changed in 2017 so that now only ~10% itemize. This should mean tax year-end giving should not matter to millions of people for whom it used to matter. Is there any data evidence to support this?
I’m not an expert in this but a quick search surfaced this article on the effect of tax reforms on 2019’s charitable giving. The researchers didn’t find a reduction. Actually, they observed an “increase in charitable contributions in 2019, even with the lower tax rates and the dramatically smaller number of taxpayers who itemize their deductions”. I didn’t find a similar analysis for 2020.
As a behavioural scientist, I’ll add that not everyone reacts to the tax rebates or reforms the same way, nor the effect is the same across all orgs. A few examples:
- people with different personality traits might react differently e.g. these changes might affect people who skew towards conscientiousness (and their giving) more than people who skew towards agreeableness.
- Differences may be observed between high and low income people. This paper found that high-income individuals respond more on the intensive margin, while the extensive-margin response is stronger among low-income taxpayers.
- Tax cuts might affect charitable orgs of different sub-sectors differently. This paper talks about a decrease in giving towards specific causes e.g. health care but not others.
Once again, the answer is never simple, nor the same for everyone.
Behavioral Science Q & A
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I’m not an expert in this but a quick search surfaced this article on the effect of tax reforms on 2019’s charitable giving. The researchers didn’t find a reduction. Actually, they observed an “increase in charitable contributions in 2019, even with the lower tax rates and the dramatically smaller number of taxpayers who itemize their […]
Read Full Answer