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We estimate the tax price elasticity of charitable giving using newly available data from the Panel Study of Income Dynamics spanning 2001–17. We find that households that always itemize are less sensitive to changes in the tax treatment of donations than households that switch itemizing status. We apply these results to the provisions of the Tax Cuts and Jobs Act of 2017, taking into account the marginal propensity to donate from the increase in disposable income expected for most households, and we predict significant reductions in charitable giving.
We thank Jeffrey Brown, Dan Hungerman, Wojciech Kopczuk, John List, Benjamin Marx, Robert Moffitt, Mark Ottoni-Wilhelm, and participants at the NBER Tax Policy and the Economy conference for comments. Daniel Feenberg provided valuable insight into the NBER TAXSIM program and Mark Wilhelm into the Panel Study of Income Dynamics data. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.