On the Desirability of Taxing Charitable Contributions

CESifo Working Paper No. 1900

On the Desirability of Taxing
Charitable Contributions

Abstract

We develop a model that allows for public goods and status signaling through charitable
contributions. This model provides a unified framework in which contributions are driven
both by altruism and status signaling. We use this setup to re-examine the conventional
practice of rendering a favorable tax treatment to charitable contributions.

JEL Code: H2, D6.

Keywords: optimal taxation, re-distribution, charitable contributions, inequality.

Efraim Sadka

The Eitan Berglas School of Economics
Tel Aviv University

Tel-Aviv 69978

Israel

[email protected]

December 2006

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