The Impact of Taxes and Wasteful Government Spending on Giving

Sheremeta, Roman and Uler, Neslihan (2016): The Impact of Taxes and Wasteful Government Spending on Giving.

Abstract

We examine the impact of taxes and wasteful government spending on charitable giving. In our model, the government collects a flat-rate tax on income net of donations and wastes part of the tax revenue before redistribution. The model provides theoretical predictions which we test in a framed field experiment. The results of the experiment show that the tax rate has a weak and insignificant effect on giving. The degree of waste, however, has a large, negative and significant effect on giving, with the relationship moderated by the curvature in the utility function.

• Item Type: MPRA Paper
• Language: English
• Keywords: giving, charity donations, tax, waste, redistribution, experiments
• Subjects: C - Mathematical and Quantitative Methods > C9 - Design of Experiments > C90 - General; D - Microeconomics > D6 - Welfare Economics > D64 - Altruism ; Philanthropy; H - Public Economics > H4 - Publicly Provided Goods > H41 - Public Goods

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