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

Julia Cagé (1, 2) , Malka Guillot (3)

1 ECON - Département d'économie (Sciences Po)
2 CEPR - Center for Economic Policy Research
3 Université de Liège

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.

Mots clés: Charitable giving; Political donations; Tax incentives for giving; Tax deductions; Wealth tax credit; Cross-elasticity of donations; Nonprofit organizations

Domaines: Economies et finances

Julia Cagé, Malka Guillot. Is Charitable Giving Political? Evidence from Wealth and Income Tax Returns. 2021. ⟨hal-03877993⟩