CeDEx workshop - Catherine Eckel (University of Texas at Dallas)

Giving to Government

Sherry Li, Catherine Eckel, Phil Grossman and Tara Larson Brown

Study 1:  In the U.S., widespread complaints that taxes are too high exist alongside substantial voluntary donations to private charities whose missions parallel those of government agencies. We employ a "real donation" experiment to compare giving to government agencies and private charities with similar missions, for four different causes (Cancer Research, Disaster Relief, Education Enhancement, Parks and Wildlife) at three levels (national, state, and local). We find that individuals will give to government, paying voluntary taxes to support specific functions. Donations average 22% of an endowment to government, significantly lower than the 27% to private charities. The difference is influenced by cause, level, and perceptions of effectiveness and efficiency, as well as individual characteristics such as income and political affiliation. 

Study 2:  This paper investigates the potential effect of donor targeted giving to specific government organizations in the form of voluntary taxes.  We design a ‘real donation’ lab experiment to compare giving to general revenue funds with donor targeted giving to specific causes.  Results show that granting donors control over the use of their funds more than doubles giving to government, and its impact is significantly larger than giving to private charities.  We argue that creating new mechanisms to facilitate voluntary taxation has the potential to enhance revenue during fiscal crisis, especially when donations can be targeted for specific programs.