by Andrew Whitehead
Tax season is in full swing and by Tuesday, April 15th, everyone must file their taxes for 2013. Many retailers have been offering an assortment of deals to those who receive tax refunds to lure them into their stores or onto their websites. Some vendors have even teamed up with online tax software. Every spring, Americans are interested in discovering if they will receive a refund, and how big that refund will be.
One important aspect of each tax return is the charitable giving each taxpayer made to various non-profit organizations. For some individuals, charitable giving is an avenue through which they can decrease their taxable income. Most non-profit groups highlight that all contributions are tax deductible. Among all non-profit groups religious organizations, and especially congregations, are common recipients of Americans’ charitable giving. A recent study shows that about 73 percent of all charitable giving goes to non-profit groups with religious ties and around 40 percent of all household giving goes directly to congregations.
How many of those who are giving to congregations do so with an eye toward the tax incentives available to them? Data from the U.S. Congregational Life Survey provide insight into this rather complicated relationship.
Do religious Americans give more to God in order to give less to Caesar? For the most part, no, they do not. Over 60 percent of worshipers claim that the tax benefits they receive for their contributions do not influence their decisions about giving to their congregation.
However, over a third of worshipers respond that the tax incentives they receive influence their decisions about giving to their congregation to some extent. Which worshipers are most likely to be in this group?
According to the U.S. Congregational Life Survey, worshipers with higher incomes and more education are most likely to report that tax incentives influence their decisions about giving to their congregations. In the figure below we see that as yearly income increases, greater numbers of worshipers report that tax incentives influence their giving decisions to some extent.
Education also influences which worshipers take tax incentives into account when deciding how much to give to their congregation. Close to half of worshipers with a graduate degree state that tax incentives influence their giving decisions.
Many times higher income and increasing levels of education signal individuals’ socio-economic status. High earning, highly educated individuals are probably most aware of the tax incentives attached to charitable giving and they are also in a position to benefit the most from those incentives. The standard Federal deductions for individuals in lower income brackets may be consistently more than they would ever be able to give away in charitable donations. For high earners, charitable giving may be a way to effectively lower their taxable income.
Somewhat surprisingly, religious beliefs, affiliation, and behaviors do not predict whether tax incentives influence worshipers’ decisions about giving to their congregation. This means that the effects of education and income are the same whether someone attends religious worship services regularly or not, reads the Bible literally or as a book of fables, or is in a Catholic parish or a very conservative or extremely liberal Protestant congregation.
While most of the people in the pews across the United States do not consider tax incentives when giving, a sizable minority does. And for these worshipers, found in congregations across the denominational spectrum, giving more to God in order to reap the tax incentives is a winning proposition.
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