Hayashi & Hopkins: The Charitable Tax Deduction And Civic Engagement

Andrew Hayashi (Virginia; Google Scholar) & Justin J. Hopkins (Virginia; Google Scholar), The Charitable Tax Deduction and Civic Engagement, 2023 U. Ill. L. Rev. 1179 (2023) (reviewed by Mirit Eyal-Cohen (Alabama; Google Scholar) here):

In an era characterized by polarization, economic inequality, and the disintegration of local communities, the income tax deduction for charitable contributions appears to abet some of our worst social ills because it incentivizes the wealthy to steer public funds to their preferred charities and subsidizes their donations. We argue that tax subsidies for charitable giving can be refocused to mitigate, rather than exacerbate, these problems. Previous assessments of the charitable deduction have ignored an essential benefit of financial giving: its effect on the donor. 

Financial giving increases volunteerism, and we report new survey evidence that volunteerism leads to broader civic and political engagement with people of different politics, cultures, races, and ethnicities. Moreover, people tend to undervalue community life relative to market commodities, so a tax incentive that steers people toward greater engagement can help ameliorate social alienation, isolation, and distrust. Since civic engagement, volunteerism, and financial donations are unequally distributed, we propose a new refundable tax credit targeting low- and middle-income households. The credit would create a new donor class, repositioning low- and middle-income households as charitable donors as well as clients, refocusing the priorities of the nonprofit sector, and creating a gateway to volunteerism, stronger community membership, and broader civic participation.