Tax Policy and Charitable Contributions of Money

Abstract

I use a recent series of household surveys to estimate the price and income elasticities of charitable giving. I estimate price elasticities of-0.94 to-1.15 and income elasticities of 0.24 to 0.35. Although the price elasticity estimates are smaller than those found in early studies, they do imply that the charitable deduction has a substantial impact on charitable giving. I also find that respondents' own reports of their sensitivity to tax deductions corroborate the price elasticity estimates. Those who report being most influenced by tax deductions have the highest price elasticity and those who report being least sensitive to tax deductions have the lowest price elasticity.