Tuesday, May 07, 2013 11:05am

Charitable Deductions

Reducing the income-tax deductibility of charitable gifts is a less distortionary way to raise new revenue than raising the same amount of revenue through a proportional increase in all marginal tax rates.

Responses
 

Source: IGM Economic Experts Panel
www.igmchicago.org/igm-economic-experts-panel

Responses weighted by each expert's confidence

Source: IGM Economic Experts Panel
www.igmchicago.org/igm-economic-experts-panel
Participant University Vote Confidence Comment Bio/Vote History
Acemoglu Daron Acemoglu MIT Strongly Agree 8
Bio/Vote History
         
Alesina Alberto Alesina Harvard Did Not Answer
Bio/Vote History
         
Altonji Joseph Altonji Yale Agree 2
Bio/Vote History
         
Auerbach Alan Auerbach Berkeley Agree 7
Bio/Vote History
         
Autor David Autor MIT Agree 6
Taxpayers subsidize too much non-meritorious activity through the tax writeoff. Tax liability should not fall 1-for-1 with charitable giving
Bio/Vote History
         
Baicker Katherine Baicker Harvard Strongly Agree 6
Bio/Vote History
         
Bertrand Marianne Bertrand Chicago Agree 2
Bio/Vote History
         
Chetty Raj Chetty Harvard Agree 8
Bio/Vote History
         
Chevalier Judith Chevalier Yale Uncertain 4
Bio/Vote History
         
Currie Janet Currie Princeton Uncertain 5
The wording implies that distortion is bad, but the point of the charitable deduction is to encourage charity, ie to "distort" behavior.
Bio/Vote History
         
Cutler David Cutler Harvard Disagree 1
This is true with no externalities; there are many externalities to charitable giving.
Bio/Vote History
         
Deaton Angus Deaton Princeton Agree 5
If minimizing distortion is your target, though seems like a very odd one.
Bio/Vote History
         
Duffie Darrell Duffie Stanford Agree 3
Less distortion, yes, but that is an efficiency issue to be traded off against the distributional effects. I would keep the deduction.
Bio/Vote History
         
Edlin Aaron Edlin Berkeley Disagree 7
Arguably charity involves an externality and so should be subsidized...the giver feels good (or wouldn't do it) and the recipient benefits.
Bio/Vote History
         
Eichengreen Barry Eichengreen Berkeley Agree 3
If other distortions lead to underfunding organizations receiving charitable giving as a result of tax treatment then the answer may differ.
Bio/Vote History
         
Fair Ray Fair Yale Agree 5
Bio/Vote History
         
Goldberg Pinelopi Goldberg Yale Did Not Answer
Bio/Vote History
         
Goldin Claudia Goldin Harvard Disagree 4
There is a free rider problem with regard to (good) charities. Removing the deduction could be more distortionary.
Bio/Vote History
         
Goolsbee Austan Goolsbee Chicago Uncertain 7
Deductions/exemptions overall, yes. But charitable alone? Not clear.
Bio/Vote History
         
Greenstone Michael Greenstone Chicago Agree 6
this is only half of the equation. possible that charitable deduction is most efficient way to achieve other important social goals
Bio/Vote History
         
Hall Robert Hall Stanford Uncertain 5
Some but hardly all charitable giving generates public goods and thus relieves distortions. We should keep the good deductions only.
Bio/Vote History
         
Holmström Bengt Holmström MIT Agree 8
Bio/Vote History
         
Hoxby Caroline Hoxby Stanford Did Not Answer
Bio/Vote History
         
Judd Kenneth Judd Stanford Agree 4
Bio/Vote History
         
Kashyap Anil Kashyap Chicago Agree 5
Bio/Vote History
         
Klenow Pete Klenow Stanford Uncertain 3
Bio/Vote History
         
Levin Jonathan Levin Stanford Did Not Answer
Bio/Vote History
         
Maskin Eric Maskin Harvard Agree 7
Bio/Vote History
         
Nordhaus William Nordhaus Yale Uncertain 8
Poorly conceived question. This is a tax expenditure. Why not compare to sequester as non-distortionary way to raise revenues.
Bio/Vote History
         
Obstfeld Maurice Obstfeld Berkeley Strongly Agree 10
Of course,the tax distortion aspect alone doesn't take account of possible social benefits from charitable giving. It is a narrow criterion.
Bio/Vote History
         
Saez Emmanuel Saez Berkeley Agree 7
Bio/Vote History
         
Scheinkman José Scheinkman Princeton Disagree 7
Bio/Vote History
         
Schmalensee Richard Schmalensee MIT Agree 4
Bio/Vote History
         
Shin Hyun Song Shin Princeton Agree 7
Bio/Vote History
         
Stokey Nancy Stokey Chicago Uncertain 5
Altruism is one motive for charity, and standard conclusions about "distorting" effects of taxes may not apply in settings with altruism.
Bio/Vote History
         
Thaler Richard Thaler Chicago Agree 7
The current system stinks. Why subsidize contribtions mostly of rich home-owners? Either kill it or make it a % credit that applies to all.
Bio/Vote History
         
Udry Christopher Udry Yale Agree 6
Bio/Vote History
         
Zingales Luigi Zingales Chicago Strongly Agree 7
Bio/Vote History
         

10 New Economic Experts join the IGM Panel


For the past two years, our expert panelists have been informing the public about the extent to which economists agree or disagree on important public policy issues. This week, we are delighted to announce that we are expanding the IGM Economic Experts Panel to add ten new distinguished economists. Like our other experts, these new panelists have impeccable qualifications to speak on public policy matters, and their names will be familiar to other economists and the media.

To give the public a broad sense of their views on policy issues, each new expert has responded to a selection of 16 statements that our panel had previously addressed. We chose these 16 statements, which cover a wide range of important policy areas, because the original panelists' responses to them were analyzed in a paper comparing the views of our economic experts with those of the American public. You can find that paper, by Paola Sapienza and Luigi Zingales, here. The paper, along with other analyses of the experts' views, was discussed during the American Economic Association annual meetings, and the video can be found here.

The new panelists' responses to these statements can be seen on their individual voting history pages. Our ten new economic experts are:

Abhijit Banerjee (MIT)
Markus K. Brunnermeier (Princeton)
Liran Einav (Stanford)
Amy Finkelstein (MIT)
Oliver Hart (Harvard)
Hilary Hoynes (Berkeley)
Steven N. Kaplan (Chicago)
Larry Samuelson (Yale)
Carl Shapiro (Berkeley)
Robert Shimer (Chicago)


Please note that, for the 16 previous topics on which these new panelists have voted, we left the charts showing the distribution of responses unchanged. Those charts reflect the responses that our original panelists gave at the time, and we have not altered them to reflect the views of the new experts.

We have also taken this opportunity to ask our original panelists whether they would vote differently on any of the statements we have asked about in the past. Several experts chose to highlight statements to which they would currently respond differently. In such cases, you will see this "revote" below the panelist's original vote. We think you will enjoy seeing examples of statements on which some experts have reconsidered.

As with the 16 previous statements voted on by new panelists, these "revote" responses are not reflected in the chart that we display showing the distribution of views for that topic: all the charts for previous questions reflect the distribution of views that the experts expressed when the statement was originally posed.

About the IGM Economic Experts Panel

This panel explores the extent to which economists agree or disagree on major public policy issues. To assess such beliefs we assembled this panel of expert economists. Statistics teaches that a sample of (say) 40 opinions will be adequate to reflect a broader population if the sample is representative of that population.

To that end, our panel was chosen to include distinguished experts with a keen interest in public policy from the major areas of economics, to be geographically diverse, and to include Democrats, Republicans and Independents as well as older and younger scholars. The panel members are all senior faculty at the most elite research universities in the United States. The panel includes Nobel Laureates, John Bates Clark Medalists, fellows of the Econometric society, past Presidents of both the American Economics Association and American Finance Association, past Democratic and Republican members of the President's Council of Economics, and past and current editors of the leading journals in the profession. This selection process has the advantage of not only providing a set of panelists whose names will be familiar to other economists and the media, but also delivers a group with impeccable qualifications to speak on public policy matters.

Finally, it is important to explain one aspect of our voting process. In some instances a panelist may neither agree nor disagree with a statement, and there can be two very different reasons for this. One case occurs when an economist is an expert on a topic and yet sees the evidence on the exact claim at hand as ambiguous. In such cases our panelists vote "uncertain". A second case relates to statements on topics so far removed from the economist's expertise that he or she feels unqualified to vote. In this case, our panelists vote "no opinion".

The Economic Experts Panel questions are emailed individually to the members of the panel, and each responds electronically at his or her convenience. Panelists may consult whatever resources they like before answering.

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