It the marginal social benefit from contributions to charities is the same for all individuals who give to charities, then allowing individuals to deduct charitable contributions from their income taxes cannot serve as a Pigouvian subsidy under a progressive income tax system.

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A Pigouvian subsidy is designed to encourage positive behaviors that have social benefits, such as supporting charities. However, in order for a tax deduction for charitable contributions to act as a Pigouvian subsidy, the marginal social benefit from those contributions must vary across donors. If the social benefit is the same for all donors, then the tax deduction does not provide an additional incentive for people to give to charities beyond that social benefit, and it cannot be considered a Pigouvian subsidy.

It the Marginal Social Benefit from Contributions to Charities Is