Should Charitable and Political Donations Benefit from Similar Tax Treatments? Evidence from a Survey Experiment

In many countries, charitable and political donations benefit from generous, and often similar tax incentives, despite serving very different purposes. While the responsiveness of charitable giving to fiscal incentives is well documented, much less is known about political donations. In a context of rising concerns over political inequality, understanding whether both forms of giving should be treated alike is particularly timely.

In this paper, Julia Cagé, Malka Guillot, and Yuchen Huang use a large-scale survey experiment (N = 12,600) conducted in France to compare the effects of different tax relief schemes. They assess how the current 66% tax credit, immediate reimbursement, matching subsidies, and repeal of the tax credit affect both charitable and political donations.

KEY FINDINGS:

• Repealing the tax credit reduces charitable giving but has no effect on political donations, suggesting much lower price sensitivity for political giving.
• At baseline, around 42% of respondents are willing to donate to charities, compared with less than 6% for political causes.
• Matching increases the amount donated conditional on giving for both types of donations, but reduces the probability of donating to charities.
• For charitable giving, removing the tax credit leads to a substantial decline in both participation and amounts donated.
• For political donations, the tax credit largely acts as a windfall, as its removal would not reduce contributions.
• Responses to tax incentives vary across groups, with lower-income individuals more likely to enter giving under reimbursement schemes.
• Overall, the results suggest that charitable and political donations should not necessarily receive the same tax treatment, with important implications for both public spending and the distribution of giving.

AUTHORS

• Julia Cagé, Sciences Po Paris and CEPR, World Inequality Lab
• Malka Guillot, HEC Liège – Management School of the University of Liège
• Yuchen Huang, HEC Liège – Sciences Po Paris