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

Author

Listed:
  • Julia Cagé

    (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique, 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.

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  • Julia Cagé & Malka Guillot, 2021. "Is Charitable Giving Political? Evidence from Wealth and Income Tax Returns," Working Papers hal-03877993, HAL.
    • Handle: RePEc:hal:wpaper:hal-03877993
    Note: View the original document on HAL open archive server: https://sciencespo.hal.science/hal-03877993
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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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