The Price Elasticity of Charitable Giving: Toward a Reconciliation of Disparate Literatures Daniel M. Hungerman ∗ Mark Ottoni-Wilhelm † ∗ University of Notre Dame and NBER † Department of Economics, IUPUI and Indiana University Lilly Family School of Philanthropy Philanthropy Research Workshop December 1, 2016
Overview - the price elasticity of giving Tax-price literature: e ∈ [-.50, -1.30] Match-price literature: e checkbook ∈ [0, -.40]. e amt received = e checkbook − 1 Innovations: First paper to directly bridge the two literatures: a tax-price e and a match-price e for same group of donors, same organization, same time period. Novel kink methods to estimate a tax-price e – identification. Tax-price e ≈ Match-price e checkbook ≈ -.20 Significance Reconciliation first step. Match-price e checkbook informative for tax policy, at least in this setting and perhaps in other settings. Price elasticity reconciliation
Figure 3. Gifts from Indiana residents to a university (joint). 15 10 Percent 5 0 200 250 300 350 400 450 500 550 600 650 700 Gifts Notes: Sample size N = 7128. Gifts were made jointly, indicating a married couple facing a limit on the tax credit at $400. Price elasticity reconciliation
Figure 4. Match-price effect on donations. Match Begins Match Ends 0.6 0.5 0.4 0.3 0.2 0.1 0 -0.1 -0.2 -0.3 2007 2007 2008 2008 2009 2009 2010 2010 2011 2011 2012 Price elasticity reconciliation
Previous literature Randolph (1995) Auten, Sieg, | Barrett, McGuirk, Bakija Clotfelter | & Steinberg (1997) & Heim (2011) (2002) | | | | ↓ ւ ↓ ↓ 0 [-.50 -1.00 -1.26] -.067 -.30 -.11 ↑ -.39 ↑ ↑ | տ | | | Karlan & | | | List (2007) | Davis (2006) Scharf & | Smith (2015) Eckel & Grossman (2003) Price elasticity reconciliation
The rest of the talk Theory: How the credit and cap affects the distribution of giving. Estimation: How we figure out e from the distribution of giving. Environment: The tax credit and the sample. Results: Three elasticities. Discussion: Implications of the results in the context of the previous literature. Price elasticity reconciliation
Indiana education tax credit Married-joint tax filers get 50% of g given to Indiana colleges, universities, seminaries reduced from income tax owed, for g ≤ $400. p = .50 for g ∈ ($0 , $400], but then p = 1.0 for amounts given over $400. Price elasticity reconciliation
Indiana CC-40 Schedule Indiana College Credit Attachment CC-40 for the Year Sequence No. 08 State Form 20152 (R / 8-01) This schedule is for computing credit for contributions to colleges and universities located in Indiana. This schedule, or a statement showing the same information, must be attached to the contributor's income tax return. Y our first name and last name Your Social A Security Number Spouse's first name and last name (if filing a joint return) Spouse’s Social B Security Number Name of Corporation or Fiduciary Federal ID Number (if applicable) D C PART I Itemized Contributions to Eligible Institutions (See reverse side for list and 4-digit code number) 4-Digit Code Amount Given Indicate below the Date of Name of Eligible Indiana College or University Number* Contribution type of return filed E F G H I by the contributor. $ Individual Corporate $ Fiduciary $ *See 4-digit college code listing on back of this schedule. Column B Column A Single or Married Married Filing PART II Individual and Fiduciary Computation of Credit but Filing Separately a Joint Return 1. Enter the total contributions to Indiana colleges and universities listed above ............................................................................................... 1 1 2. Enter 50% of line 1 ........................................................................... 2 2 3. Limitation ($100 single return or $200 joint return) ................................ 3 100.00 3 200.00 4. Enter the lesser of line 2 or line 3 ....................................................... 4 4 5. Enter Indiana adjusted gross income tax from line 14 of IT-40, line 12 of IT-40PNR or line 8 of IT-41 ...................................................................... 5 5 6. Allowable College Credit: Enter line 4 or 5, whichever is less. Enter here and on IT-40 Schedule 2, line 4; on IT-40PNR Schedule E, line 4; or on IT-41 line 12 ..................................................................................... 6 6 PART III Corporation's Computation of Credit 1. Enter the total contributions to Indiana colleges and universities (listed above) .......................... 1 2. Enter 50% of line 1, or $1,000, whichever is less .................................................................... 2 3. Enter the adjusted gross income tax from the appropriate line on IT-20 or IT-20SC ..................... 3 4. Multiply line 3 by 10% (.10) ................................................................................................... 4 5. CREDIT: Enter line 2 or line 4, whichever is less. Enter here and on appropriate line of the corporate tax return ............................................................................................................... ▼ ▼ ▼ ▼ ▼ 5 Important: The taxpayer will be required to retain the receipts given by the Indiana colleges and universities indicating that a contribu- tion has been made. These receipts should be maintained for a period of three years after the due date of the annual tax return where the credit was taken or three years after the date that return was filed, whichever is later. Price elasticity reconciliation General Information
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