FURTHER EVIDENCE ON THE DYNAMIC IMPACT OF TAXES ON CHARITABLE GIVING

We estimate the impact of taxes on donations using a large panel of mi ddle-class taxpayers. Our specification allows estimation of the effec ts of habits, time shifting, and consumption smoothing on the time pat h of adjustment and produces plausible simulated adjustment paths to p ermanent and temporary anticipated tax reforms. We find that taxes det ermine both the long-run level and the timing of donations, so that, e ven though taxes appear to have long-run behavioral effects, estimates of these effects are exaggerated if one fails to estimate the resched uling of giving in response to tax regime shifts. Our results challeng e the view that tax deductions for charitable giving are efficient.