JR, a loyal MR reader, writes to me:
Your loyal readers, such as myself, know of your love for mormons. This made me curious whether you think the tithing requirement in mormonism have have the same incentive effects as a tax.
On one view, people will only bother giving if they are actually pleased about being able to contribute to church so the tithing is a form of consumption, not a tax.
On another view the tithing is a price you pay to maintain social status in your group. You may be able to cheat a little, but not too much on the requirement before the church notices that you are not paying a sum that corresponds to your apparent income. In that case one would expect it to act more like a tax.
Finally one can speculate that even if one has internalized the requirement to pay the tithe, and really, truly believes it, it might still act as a tax. One might feel it like a duty to pay, but feel any guilt over not maximizing ones income in order to pay more.
What is your take? There are many religions with tithing requirements including Islam so it ought to be of general economic interest to figure out its effects.
I would model tithing as similar to paying a tax, except that a) the act of payment itself yields utility, and b) there may be a kink at the level of the suggested tithe. For instance you know that if you pay ten percent, you are respected within the church community. Paying eleven percent does not get you proportionately more respect, however. In such a model, tax incidence theory changes. It would matter which side of the market a tax is levied upon, to give one concrete example. You don’t just care about “how much the church gets,” you also care about “how much you give to the church,” and with the kink you’ll try to stay at ten percent whether the supply side or demand side of a donation is taxed. Thus if there is a tax on the demand side you will give more, but not if your contribution is taxed on the side of the church.
This kind of tithing motives also weakens the crowding out of donations if the government subsidizes the church, for instance. You’ll stick at ten percent even if the church coffers are overflowing from the subsidy. Or tax subsidies to giving may not push many people over ten percent, because ten percent suffices to earn most of the respect on tap.