CONTRIBUTIONS OF VOLUNTEER TIME: SOME EVIDENCE ON INCOME TAX EFFECTS

Abstract

THERE literature exists on the a substantial effects of tax empirical policy iterature on the eff cts f tax polic on charitable contributions of money and property.1 But philanthropic organizations receive, and tax policy may also affect, donations of significant resource value in the form of volunteer hours. Various estimates place the aggregate dollar value of this time equal in magnitude to that of money contributions.2 As yet the relationship between the two forms of donation and the effects of tax policy on time contributions have not been examined empirically. This paper builds on Stephen H. Long's theory of Income Tax Effects on Donor Choice of Money and Time Contributions3 and provides evidence on the tax sensitivity of time donations. There are a variety of ways in which tax changes can affect money contributions. For example, the Fisher-Conable proposal would extend the contributions deduction to those electing the standard deduction. Also, inflation of incomes with a nominal standard deduction (or zero bracket amount) serves to raise the number of households that itemize. Predictions from existing evidence concern the magnitude of the stimulative effect of such changes on money contributions alone. Economic theory suggests that when money contributions are made cheaper time contributions may also be affected, but that there are opposing forces which serve both to increase and to decrease time gifts. The empirical resolution of these opposing forces is the primary goal of this inquiry.