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| Publications [#45415] of Charles T. Clotfelter
Chapters in Books
- Clotfelter, Charles T. and Richard L. Schmalbeck, The Impact of Fundamental Tax Reform on Nonprofit Organizations,
in Economic Effects of Fundamental Tax Reform, edited by Henry J. Aaron and William G. Gale
(1996),
pp. 211-243, Washington, DC: Brookings Institution
(last updated on 2006/12/04)
Abstract:
Major changes in the U.S. tax system are being urged by many, and considered by virtually all of the participants in national policy-making. Because the nonprofit sector of the American economy is largely shaped by the tax system from which it is largely exempt, any major changes to that system,whether or not targeted at nonprofits, are likely to affect them profoundly.In this paper, we analyze the effects of three types of fundamental change in the tax system, involving, respectively, consumed-income taxes, "flat"taxes, and business transactions taxes, either as supplements to, or replacements of, the current individual and corporate income taxes. Our analysis suggests that all of these proposals would have significant and adverse impact on the nonprofit sector. In particular, business transfer taxes pose the greatest threat to the value of the tax exemption itself. "Flat" taxes--especially those that contain no provision for deduction of charitable contribution--are likely to have the greatest impact on the incentives to make contributions to those charitable nonprofit organizations that are currently eligible to receive deductible contributions. An important feature of the paper is the application of simulation techniques to predict the consequences of the tax proposals on the amount of charitable contributions. The model employed suggests that some forms of "flat" taxes may depress individual contributions by as much as a fifth, and that the proposed repeal of the estate and gift tax, and the proposed elimination of deductibility of corporate charitable contributions may depress contributions from those sources by more than a third.
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