Tax incentives for charitable giving are a critical element of the policy infrastructure sustaining nonprofit organizations. This study examines the impact of Korea’s 2014 income tax reform—which converted donation deductions from an income deduction to a flat-rate tax credit—on the financial resource base of the third sector. Using administrative panel data of 100,000 wage and salary earners from the National Tax Service (2009–2018), we employ a difference-in-differences strategy to identify the reform’s causal effect. The reform significantly reduced both the probability of donating (by 0.8 percentage points) and donation amounts (by 7.48 percent), with effects concentrated among higher-income earners who constitute a disproportionate share of nonprofit revenue. Drawing on the philanthropic behavior and institutional context literatures, we discuss implications for nonprofit financial sustainability and offer policy lessons for countries considering similar reforms.

Employees can receive compensation in forms that are immediately taxable, such as wage and salary payments; tax exempt, such as employer-paid premiums for health insurance; or tax deferred, such as certain contributions to retirement plans. A higher tax rate makes it more attractive to receive compensation in the form of untaxed or tax-deferred benefits. Using data from IRS Form 990, this paper provides evidence about how tax rates affect the mix of taxable and other compensation received by a particular type of employee, the leaders of nonprofit organizations. Preliminary analysis suggests that nonprofit organizations located in states with higher top marginal personal income tax rates pay a higher share of compensation in non-taxable forms.

We study the effects of a temporary tax on high wages levied on employers in the Netherlands. The tax imposed a 16 per cent surcharge on the portion of wages above €150,000 in 2012–2013. Using employer–employee data and tax returns, and combining bunching, difference-in-differences and triple-differences designs, we find no effect on employees’ wages, implying that employers bore the full burden of the tax. In contrast, owner-managers reduced their pay to offset the surtax. The response to the tax persists for many years after its repeal. To prevent income relabelling, anti-avoidance rules set a minimum level of compensation for owner-managers. We find no response among those for whom these rules bind, suggesting that they can effectively limit tax avoidance. Our results show that the capital-labour income split in private businesses is sensitive to tax laws, that temporary taxes can have long-lasting effects, and that elasticities are shaped by policy design.

This paper documents sharp bunching in third-party reported employment earnings at a basic exemption for social security contributions among older workers. Beginning in 2012, workers age 60-64 who were receiving a public pension were required to make social security contributions equal to 9.9 percent of their employment earnings above a basic exemption threshold of $3,500. Using administrative data on third-party reported earnings and a differences-in- bunching estimator we document sharp bunching at the $3,500 threshold. We argue that our results represent new evidence on the role of firms in mediating the earnings response to payroll taxes.