Christmas is the season of giving, but some states might soon be placed on Santa’s naughty list. During Christmas, the perennial dictum is to spread peace and goodwill. State legislatures impact the holidays through their public policy decisions, and a major component of public policy during the Christmas season is the role that charitable organizations have in addressing social and economic issues. Charitable organizations are funded privately through donations, so it is imperative for lawmakers to understand how their decisions affect these organizations, as well as their communities.
The American Legislative Exchange Council (ALEC) recently released a report titled State Factor: The Effect of State Taxes on Charitable Giving, which examines state tax policies and encourages charitable giving apart from the charitable giving deduction. The report, written by ALEC Director Jonathan Williams, Research Analyst William Freedland, and Research Director Ben Wilterdink, provides an analysis of philanthropic contributions in the states over time and uses rigorous economic analyses to draw conclusions about charitable giving. The authors found, from 1997 to 2012, residents of Georgia, Idaho, Maryland, Mississippi, North Carolina, Oklahoma, South Carolina, Utah, and Wyoming donated the most to charity as a percent of total income.
Santa will also be pleased to hear the ALEC study notes 41 states experienced increases in charitable giving over the 15-year span studied, and the most charitable states were correlated with higher rates of economic growth. South Dakota, Tennessee, Texas, and Wyoming are four of the nine states that had the largest increase. All four do not impose a personal income tax.
While there are typically multiple factors that influence an individual’s choice to offer charitable donations, it is imperative to remember there are all-encompassing policy choices that can encourage higher rates of growth in charitable giving. In a recent article for Opportunity Lives, Daniel Huizinga states, “Numerous studies and policy experts have recognized that nongovernmental organizations, including churches and faith-based charities, secular nonprofits and even for-profit corporations tend to have more success combating poverty than large, bureaucratic government agencies. Yet this point is often forgotten in tax policy debates, which often assume that cutting taxes will deprive the poor of life-saving services.”
In a recent episode of the Heartland Daily Podcast, Jesse Hathaway, managing editor of Budget & Tax News, spoke to Williams about how state taxes affect charitable giving. Williams told Hathaway, “Some states’ policies discourage getting into the holiday giving spirit, crowding out and replacing private charities with bigger and more expensive government.
“States with smaller governments tend to provide for perceived public needs by giving more to charity to fill that gap,” said Williams. “Moreover, citizens tend to respond to tax increases by decreasing their charitable giving, while increasing their charitable giving in response to tax reductions.”
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Budget & Tax
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Energy & Environment
Research & Commentary: Ethanol Mandates and Renewable Fuel Standards Hurt Illinois Residents and Farmers
The Center for Regulatory Solutions (CRS) has produced a series of reports on the deleterious effects of the corn ethanol mandate, also known as the Renewable Fuel Standard (RFS), on state economies and environments. The latest report, released in late November, focuses on RFS’ impact on Illinois. CRS reports RFS led to $5 billion in unnecessary additional fuel costs for Illinois residents through 2014. If the mandate is unchanged, CRS projects it will cost Illinois residents another $17 billion through 2024. CRS notes these higher fuel costs will depress labor income by roughly $7 billion by 2024, potentially preventing more than 7,000 new jobs per year and causing more than $12.1 billion in lost gross domestic product. In this Research & Commentary, Policy Analyst Tim Benson notes RFS is also harmful to the environment, as biofuel production requires a great deal of land, disrupting the carbon-storing potential of the soil and at least partly offsetting emissions reductions that may have been achieved by substituting ethanol for regular gasoline. Read more
Research & Commentary: Alabama Medicaid Expansion
At a recent meeting of the Alabama Health Care Improvement Task Force, the group recommended Gov. Robert Bentley (R) and the state’s legislature expand Alabama’s Medicaid program. Thirty states and the District of Columbia have chosen to expand Medicaid under the Affordable Care Act, and 20 states have refused to do so. The recommendations from Alabama’s task force will not be binding: Medicaid expansion will still require approval from the governor and funding from the legislature. In this Research & Commentary, Senior Policy Analyst Matthew Glans argues Alabama lawmakers should continue to resist Medicaid expansion and instead reform the fiscally unsustainable program in ways that would offer better care to enrollees and lower costs for taxpayers. Read more
From Our Free-Market Friends
The Buckeye Institute Releases Economic Freedom of North America 2015
The Buckeye Institute, partnering with the Fraser Institute, released an economic freedom ranking of every state in North America. The report, titled Economic Freedom of North America 2015, ranks states based on economic freedom levels, which were measured by analyzing government spending, taxation, and labor market restrictions using data from 2013, the most recent year of available data. According to the report, Ohio ranks 40th among the 50 states in economic freedom. The report says Ohio’s high levels of government spending on public employee pensions, the state’s workers’ compensation program, and social programs contributed to Ohio’s poor ranking.