The Charitable Tax Deduction and Civic Engagement

61 Pages Posted: 22 Jul 2021 Last revised: 18 Oct 2021

See all articles by Andrew T. Hayashi

Andrew T. Hayashi

University of Virginia School of Law

Justin Hopkins

University of Virginia - Darden School of Business

Date Written: July 22, 2021

Abstract

In an era characterized by inequalities of income and influence, political polarization, and the segregation of social spaces, the income tax deduction for charitable contributions would appear to abet some of our worst social ills because it allows wealthy individuals to steer public funds to their preferred charities. But we argue that now is the time to expand and refocus—not abolish—the tax subsidy for charitable giving. Previous assessments of the charitable deduction have focused on how it helps charities but ignored an essential benefit of giving: its effect on the donor. We show that the charitable deduction increases volunteerism along with financial giving, and we report new evidence that volunteerism is associated with broader civic and political engagement, including engagement with people of different cultures, races, and ethnicities. Since people tend to undervalue the social and relational goods that flow from civic participation, the charitable deduction is a helpful corrective. We also report evidence that civic engagement is unequally distributed and propose a new refundable tax credit that turns low- and middleincome households from clients of charities to donors, which can both empower them and help remedy inequalities in civic and political participation.

Suggested Citation

Hayashi, Andrew T. and Hopkins, Justin, The Charitable Tax Deduction and Civic Engagement (July 22, 2021). Virginia Law and Economics Research Paper No. 2021-13, Virginia Public Law and Legal Theory Research Paper No. 2021-33, Darden Business School Working Paper No. 3891628, Available at SSRN: https://ssrn.com/abstract=3891628

Andrew T. Hayashi (Contact Author)

University of Virginia School of Law ( email )

580 Massie Road
Charlottesville, VA 22903
United States

Justin Hopkins

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States

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