ABSTRACT
Governments often encourage charitable giving through the tax system, by a
deduction or tax credit. In 1988, Canada moved from a deduction system to a
tax credit system. The tax credit for donations above $250was calculated at
the highest tax rate, even if the taxpayer was at the lowest tax rate. This gives
what can be called a “superdeduction.” At the same time, the top rate of tax
was reduced. Thus, the cost of giving was reduced for the lower taxpayers
and increased for the higher-income taxpayers.