The Extent And Efficacy Of State Charitable Contribution Income Tax Credits

Nicolas Duquette (USC), Alexandra Graddy-Reed (USC) & Mark Phillips (USC), The Extent and Efficacy of State Charitable Contribution Income Tax Credits:

State-level individual income tax credits for charitable giving are a common and often generous subsidy for donors but have not been examined holistically. This paper gathers novel panel data on each US state’s income tax credits for charitable contributions, identifying 46 credits in 23 states between 2000 and 2016. Generally, the credits target specific types of charitable giving and are more generous than federal and state charitable deductions, while not requiring taxpayers to itemize.

These data are linked to the PSID/COPPS panel data on charitable giving to compute estimates of policy effects. Estimated policy effects are not statistically different from zero and are estimated with sufficient precision to rule out large effects. We conclude with a discussion of potential reasons states’ credits have little effect on giving.