Maybe I should rephrase my query as like this, "Why are ppl donating if you can't save more than the amount you donate"?
Simple: Because they want to be philanthropic. They want to support charitable causes they care about, and they want those less fortunate to be better off -- and the world to be a better place. It gives them joy to spread happiness/reduce suffering. Maybe, occasionally, they boost their reputations in society and see the benefit in that -- their names engraved on the donor registry, or whatever.
At the end of the day wealth just sitting somewhere is just an electronic number in a database. Many people experience no greater joy in getting another iPhone, or whatever.(*) So why not use surplus wealth to make other people happier? And if the government is kicking in some dollars in the form of tax relief (a partial return of my donation in the form of a lower tax bill), great, all the better.
(*) There are actually some good studies attempting to answer this "satiation" question: "How much wealth/income is enough to reach peak obtainable happiness?" And the answer is roughly speaking "upper middle class U.S. standards." (The Princeton study looked at the U.S.) Past that point you might be able to buy more for yourself, and you might do that, but you won't be any happier. You'll just have more stuff. People vary of course, but that's the typical experience if these studies are correct.
