Policy Analytics of the Tax Treatment of Charitable Contributions

A new report
January 03, 2013

by Benjamin Zycher, Ph.D.

San Francisco – The Pacific Research Institute, a free-market think tank based in San Francisco – today released the new report “Policy Analytics of the Tax Treatment of Charitable Contributions” authored by economist and PRI senior fellow Benjamin Zycher, Ph.D.  

Current proposals in Washington to change the favorable tax treatment of private giving, and larger proposals to reform the federal tax system, would have important effects on charitable giving and thus on the benefits that private charitable institutions yield. According to Dr. Zycher, a change in the tax treatment of charitable giving is likely to have significant effects on the level of such giving. Prominent proposals to change the way that the current tax system treats charitable donations would be likely to reduce such giving by $5 to $10 billion per year, an effect equal to significant percentages of the operating budgets of major charitable organizations in the U.S.


Dr. Zycher also writes that the public discussion of changes in the tax treatment of charitable giving should consider not only the narrow effects on contributions, but also the more subtle but larger implications for the substantial benefits that the institutions of civil society yield in terms of the protection of our freedoms.  “To the extent that private charity---giving that passes a crude market test---yields increases in both altruistic endeavors and the strengthening of the institutions of civil society, it would be wise for policymakers to keep these important effects and factors in mind,” Dr. Zycher said.  The report “Policy Analytics of the Tax Treatment of Charitable Contributions” provides:   

• a discussion of the central policy justifications for the tax preference enjoyed by those making charitable contributions, or, more rigorously, the rationales for public support of private charity through the tax code,  • a summary of the peer-reviewed empirical literature on the effect of changing tax rates and deductibility on the level of charitable giving,  • a brief discussion on how the tax preference for charitable giving might be incorporated into a tax reform effort striving toward a “flat” income tax or a consumption tax, and• concluding observations.

To learn more about “Policy Analytics of the Tax Treatment of Charitable Contributions” or to arrange an interview with author Dr. Benjamin Zycher, please contact Rowena Itchon at PRI’s Press Office at (415) 955-6123 or contact Laura Dannerbeck at  ldannerbeck@pacificresearch.org.

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