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Subsidizing Charitable Contributions With a Match Instead of a Deduction: What Happens to Donations and Compliance?

Blumenthal, Marsha, Kalambokidis, Laura, and Turk, Alex

Abstract:

The current U.S. income tax system subsidizes contributions to charities by allowing individual taxpayers to itemize and deduct contributions from taxable income. In effect, taxpayers can receive a rebate from the government based on the contributions they make to charitable organizations. Under one alternative system, the government matches the contributions of individual taxpayers at some rate between 0 percent and 100 percent. This paper explores the tax policy and administrative implications of matching rather than rebating contributions in a tax system with voluntary reporting. We conduct a novel experiment to examine both charitable giving and compliance behavior under the two regimes.

Citation

Blumenthal, Marsha, Kalambokidis, Laura, and Turk, Alex (2012), Subsidizing Charitable Contributions With a Match Instead of a Deduction: What Happens to Donations and Compliance?, National Tax Journal, 65:1, pp. 91-116

DOI: dx.doi.org/10.17310/ntj.2012.1.04