1. An individual with a taxable income of over $20 million has a liability of $1 million
a. The individual contributes $1,333,333 and will not pay any state income tax (or will receive a $1,000,000 refund).
b. The individual contributes $1 million will only pay $250,000 in state income tax (or will receive a $250,000 refund).
2. An individual with a taxable income of $55,000 has a withholding of $2,725 and a liability of $2,172. He would receive a refund of $553 without contributing. He also contributes $350 annually to charity.
a. If the individual contributes $2,000, he will receive an additional $1,500 for a total refund of $2,053, which exceeds his donation by $53.
b. If the individual stops his employer from withholding $2,725 and contributes $2,896, he will pay nothing in state income tax. This $2,896 contribution will cost him $14 a month.
c. If the individual wishes to simply shift tax dollars to charity without increasing his out-of-pocket costs, he contributes $1,310. That reduces his taxes by $982 to $1,190. His total out-of-pocket is $2,500 which is $22 less than it would otherwise be ($2,172 in taxes + $350 in charity = $2,522), and he has shifted nearly $1,000 from taxes to scholarships for low-income children.