THE INCOME TAX AND CHARITABLE CONTRIBUTIONS: PART II—THE IMPACT ON RELIGIOUS, EDUCATIONAL AND OTHER ORGANIZATIONS

Abstract

Several studies have shown that the volume of gifts to all charities combined is quite sensitive to the reduced cost of giving that is implied by the income tax. The sensitivity of charitable giving to potential tax changes differs substantially among the major types of donees. Gifts to educational institutions and hospitals are very sensitive to the cost of giving while religious organizations are much less sensitive than the others. Eliminating the charitable deduction would reduce total individual giving by an estimated 20 percent, but gifts to educational institutions and hospitals would be cut approximately in half Although replacing the current deductible by a 30 percent tax credit would increase total giving by some 15 percent, educational institutions and hospitals would still lose about 20 percent of current gifts.