The Surprising Relationship Between Taxes and Charitable Giving [WSJ]
It's not all that surprising, really. Especially the people who give generously and like to play it like they don't care about the charitable deduction, when in fact, they really, really, really care about the deduction, as a survey from Indiana University found:
According to the survey, people’s main motivations for giving were to make a difference (73.5%) and for personal satisfaction (73.1%). Receiving a tax benefit came way down in 11th place in the list of possible reasons, cited by just 34.4% of respondents. And most people insisted that they’d still give the same amount even if they received no income-tax deduction for charitable giving.
But their answers changed when there was a real possibility of that tax deduction being reduced, indicating that people were happy to say that the tax deduction wasn’t all that important, until they came face to face with the likelihood that it might go away. In 2009, when the future of the charitable deduction was being debated, 67% of people said they would decrease charitable giving if the deduction were eliminated, up from 46.6% in 2005. In 2013, when the debate about capping the deduction had died down, the results returned more or less to the 2005 levels.
Also! Another study found that the way our tax system subsidizes charitable giving isn't as effective as it could be:
In one experiment, they gave people money and offered them a list of charities to which they could donate. Some people were offered a 50% rebate on their donations, others a dollar-for-dollar match with no rebate or deduction. In both scenarios, the charity received $1 for every 50 cents the participant donated. But people’s reactions were far from equal.
“We found consistently that subjects gave more under the matching system than the rebate system,” says Prof. Grossman.
In a follow-up study, Prof. [Philip] Grossman and his colleagues offered people a choice between getting a rebate and getting a match, and were surprised to find that about half chose each option, meaning they didn’t see one as being more advantageous than the other. And, again, the people receiving the match gave more generously than those receiving the rebate.
Also not surprising — organizations that receive government grants tend to receive less contributions. Yet another study found that a $10k grant reduces donations by about $7,500.
Tax Break for Home Short Sellers at Risk [WSJ]
If you follow the politics of tax policy, you know that people have been worried about the extenders package that has been stalled all year long. Home sellers who receive proceeds less than their mortgage balance have received a tax break since 2007 and people are sweating it and the rest of the breaks that are hanging in legislative purgatory:
Otherwise distressed owners would have to pay taxes on the difference between what they owe on the mortgage and the amount raised in the short sale. They also would have to pay taxes on the difference if the lender agrees to reduce the principal amount that the borrower owes.
For example, if someone sells their home for $250,000 and owes $300,000 on their mortgage, they would owe taxes on $50,000—roughly equal to the country’s median household income.
Technically, the tax break expired at the end of 2014, leaving homeowners in limbo for 2015. Although it is widely expected to pass, if it weren’t renewed, homeowners who received some relief this year could now take a hit when they file their taxes next year.
Congressional brinksmanship at its finest.
In other news: