From March, Scott Hodge has a suggestion for covering our annual deficit:
The menu of solutions to close this gap is just as depressing: slash benefits and services or raise taxes. But one option could generate substantial revenue while making the tax system fairer: ending the tax exemption for America’s massive nonprofit business sector.
Many “charities” have become big businesses. While numerous benevolent charities do wonderful work, the industry is dominated by some of the top companies in America operating largely free from the tax obligations that burden their for-profit competitors. The commercial revenue generated by these nonprofits totaled $2.8 trillion in 2023, nearly three times the amount nonprofits receive from donations and government grants.
The warning signs were there in 1909 when Congress exempted charitable organizations from the corporate income tax. Although lawmakers intended to protect small fraternal societies providing insurance to widows and tending to the poor, they also exempted enterprises such as mutual lending and insurance companies, thus opening the door to exempting other business-like entities. [WaPo]
This is the sort of thing where the initial and continuing evaluation approach are attempts to discredit it. To me, the problem requiring a lot of thought is how to reliably distinguish between charitable and non-charitable revenue streams.
But I think it’s worth at least investigating further, and to ask whether or not charities really should not be paying taxes.
