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The surprising relationship between taxes and charitable giving
Source:
marketwatch.com
- Jan 22, 2016
When it comes to charitable giving, it’s well known that taxes matter. The promise of a big deduction is a great way to get people to open their checkbooks.
Yet the relationship between taxes and giving isn’t as simple as it looks.
Researchers have been studying the issue for years, some by sifting through masses of tax-return data, others by handing people money and seeing how their donation decisions change when they are “taxed” in various ways. The results show that the money and taxes relationship is a lot more nuanced than the idea that a bigger deduction means a bigger donation—with significant implications for both charities and policy makers.
For instance, research suggests that the system of itemized deductions the U.S. has been using for decades is much less effective at spurring donations than tax systems in other countries that, for instance, offer charities matching donations. Still other research suggests people may even be willing to give money voluntarily to the government—if the government gives them the chance to direct the money to a cause they approve of.
Meanwhile, some scientists have found that the brain reacts the same way to making donations as it does to paying taxes, if the taxes are clearly being used for a good cause—suggesting that people may be more willing to pay taxes if they know how the money’s being used. And some findings even suggest that offering deductions for charitable giving may promote good health.
Here’s a look at some of the findings, and the lessons they hold for policy planners.
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Category: IRS
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