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Is Charitable Giving Political? Evidence from Wealth and Income Tax Return

Author

Listed:
  • Julia Cagé

    (Institut d'Études Politiques [IEP] - Paris, CEPR - Center for Economic Policy Research)

  • Malka Guillot

    (Université de Liège)

Abstract
Is charitable giving politically motivated? In this article, we use exhaustive administrative household panel data and a natural experiment to quantify empirically the motivations for giving. Our dataset includes all the households filing their income tax and/or their wealth tax returns in France between 2006 and 2019. In France, both charitable and political donations benefit from a 66% income tax credit, but only the charitable ones are eligible for the 75% wealth tax credit. We exploit the 2017 wealth-tax reform-a change in the taxable base that led to a drop of two third in the number of liable households and, as a result, an increase in the price of charitable giving-and show that charitable and political donations are substitute. According to our estimates, a one-percent increase in the price of charitable giving leads to an increase of around 0.12% in political donations. Next, using city-level information, we show that the increase in the price of charitable giving mostly benefits pro-business political parties. Finally, we document that the drop in charitable donations is mostly driven by politically-involved nonprofit organizations, pointing toward political motivations behind charitable giving.

Suggested Citation

  • Julia Cagé & Malka Guillot, 2023. "Is Charitable Giving Political? Evidence from Wealth and Income Tax Return," World Inequality Lab Working Papers halshs-04173178, HAL.
    • Handle: RePEc:hal:wilwps:halshs-04173178
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-04173178
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    1. Garbinti, Bertrand & Goupille-Lebret, Jonathan & Munoz, Mathilde & Stantcheva, Stefanie & Zucman, Gabriel, 2023. "Tax Design, Information, and Elasticities: Evidence From the French Wealth Tax," CEPR Discussion Papers 18206, C.E.P.R. Discussion Papers.

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    More about this item

    Keywords

    charitable giving; political donations; tax incentives for giving; tax deductions; wealth tax credit; cross-elasticity of donations; nonprofit organizations;
    All these keywords.

    JEL classification:

    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • L38 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Public Policy

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