Information and Updates on Current Issues
Tax Deduction Would Increase Bay State Giving Substantially
voters are considering a ballot initiative that would allow them to
deduct donations to charitable organizations from their personal state
income tax. This initiative aims to increase charitable giving in Massachusetts,
a state known for its lack of generosity.
if passed by voters in November, would allow all taxpayers who make
charitable contributions to be eligible for a state personal income
tax deduction. Charitable contributions are those donations to qualified
charities as determined by the IRS. These include religious, health,
educational, human service, arts and cultural, civic, environmental
and international organizations.
law would go into effect on January 1, 2001. The deduction would be
available to all taxpayers, including those who do not itemize on their
federal tax returns. About one-third of Massachusetts residents itemize
deductions on their federal tax returns. Even fewer file returns with
with other states, in a measure of income and giving Massachusetts has
a poor record of charitable giving. The Commonwealth ranked 48th
in a 1997 Generosity Index that measured contributions among
the states compared to income.  When it comes to giving
by taxpayers with incomes over $100,000 but less than $200,000, Massachusetts
fares worse. In this category the Commonwealth ranks last according
to an analysis performed by the Catalogue for Philanthropy. 
are of proven effectiveness in encouraging giving. The price
of giving a dollar can be measured as $1 minus any tax reduction in
taxes enjoyed as a consequence of giving that dollar. A state deduction
would reduce the price of giving.
Hill Institute estimated the effects this ballot initiative would have
on individual giving to charities and tax revenues. BHI found that as
a result of the new tax deduction, charitable contributions would increase
by $1.435 billion over a five-year period. The cost to the Commonwealth
would be approximately $1.016 billion in revenues over the same period.
See Table 1.
1. Estimates of the Charitable Tax Deduction's Giving and Revenue Effects
in Giving 
giving would exceed the loss in tax revenue by nearly 40%. This increase
would allow the state to transfer some government-provided services
to the private sector. The opportunity to transfer responsibility from
the public sector to the private sector would widen as more taxpayers
contributed more to charitable organizations.
tax incentives for charitable donations enjoys popular support. A Beacon
Hill Institute survey in 1998 found that 69% of Massachusetts voters
would be more inclined to give to charities that help the poor if they
received a more generous tax break for giving. This sentiment cut across
all religious, income, educational and ethnic groups.
proposed measure passes, Massachusetts would improve its standing on
the so-called "Generosity Index" of charitable giving. In
addition, the ballot proposal would spur a substantial increase in giving
over current levels.
2. Massachusetts Charitable Giving
August 26, 1999 Chronicle of Philanthropy, "Tax Deductions
for Charitable Giving";Catalogue of Philanthropy.
Hill Institute is recognized nationally for its research on taxpayer
behavior and on charitable tax credits. Continuing research on charitable
tax incentives is conducted under the auspices of the Institute's Ray
Shamie Center for Civic Enterprise.
Analysis by George McCully, June 30, 1999 for the Catalogue for Philanthropy
using Statistics of Income Bulletin from the Internal Revenue Service
Change in giving compared to what we predict would have been given in
this year without the deduction.
Based on the extent of giving and income in 1997 reported by the Chronicle
of Philanthropy, we can estimate what giving would have been had
the charitable deduction been allowed on state income taxes in 1997.
We estimate that giving would have increased to $2,725 on average per
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