CHARLES T. CLOTFELTER and C. EUGENE STEUERLE
IN 1978 an estimated $32.8 billion was contributed by living individuals to the nation's charitable organizations.1. Representing 2.25 percent of disposable personal income, these donations accounted for 83 percent of giving from all sources: living individuals, bequests, corporations, and other institutions. Donations of time and talent were also of great importance; one estimate indicates that annually over 6 billion hours of time are given to charitable and religious organizations.2. Many of these contributions support educational, scientific, religious, and cultural activities, promote the public good, and enhance the opportunities of individuals unrelated to the donors. It is therefore not surprising that charitable giving is often seen as a close substitute for many government programs and that public policy toward such giving has received a great deal of attention.
The most important federal policy affecting charitable giving is the deduction for contributions allowed in the individual income tax. Enacted in 1917, the deduction appears to have been designed originally to ensure that the income tax did not discourage charitable giving. Since then the incentive effect of the deduction (or disincentive effect of the____________________