Who Gains from Charitable Tax Credit Programs? The Arizona Model |
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| Authors: | Carol J. De Vita Eric C. Twombly |
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| Affiliation: | Carol J. De Vita;is a senior research associate in the Urban Institute's Center on Nonprofits and Philanthropy, where she studies the role, financial capacity, and networks of nonprofit organizations in local communities. Her work focuses on faith-based groups and their ability to provide services in low-income neighborhoods. E-mail: . Eric C. Twombly;is a research associate at the Urban Institute. His research focuses on community-based social service provision, and he is currently directing a project of community-based organizations that serve children and youth in the Washington, DC, metropolitan area. E-mail: . |
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| Abstract: | The Bush administration and some states have promoted charitable tax credits as a way to increase private charitable giving, to support antipoverty programs, and to allow taxpayers to directly determine the utility and effectiveness of nonprofit services. Looking at Arizona's charitable tax credit program, this study assesses the strengths and limitations of this policy approach. Although charitable giving increased during the first two years of the program (1998 and 1999), tax returns from 2000 suggest it may be difficult to sustain these gains in a weak economy. Larger and better-known nonprofits and taxpayers who itemize their returns are the primary beneficiaries of the program. The program may put small but well-run organizations at a competitive disadvantage, weaken accountability in the sector, and pose administrative challenges to state departments of revenue. This analysis suggests that tax credits are not a panacea for the funding needs of nonprofits. |
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