Reining in America's $3.3T tax-exempt economy

> More than half (55 percent) of all the income generated by 501(c)(3) organizations comes from tax-exempt hospitals and health-care plans.

The median operating margins for hospitals is around 0% or some times negative. Injecting more costs into the system is only going to push prices further upward.

> The majority of tax-exempt organizations today are business-like in form and function, including credit unions, hospitals, utilities, insurance companies, universities, professional athletic associations, golf clubs, and consulting firms, to name a few.

I'm completely on board with clamping down on tax exempt status for a lot of these other businesses, though. Credit Unions are nice, but they're still just banks. Insurance companies are obviously businesses. Athletic associations, golf clubs, consulting firms -- What is even going on that allowed these to be nonprofits?

Incoherent argument. Non-profits pay sales taxes, income taxes for employee salaries, and, in many cases, property taxes. The only thing they aren't ever paying taxes on is profits, because... they are non-profits. They don't pay out profits to owners.

Some non-profits are exempt from property taxes and other taxes (e.g. universities) and abuse this by becoming huge landowners. This should probably be reined in.

Setting more appropriate land taxes would be a good start, which is much easier then trying to figure out how to tax income. The harder part is reducing the tax liability based on the "public good" or "how benevolent" the organization is. Hard but not impossible. For example, a private golf club would pay higher taxes than a public golf course. Or a church that allows anyone in or has tons of community outreach to the neighborhood pays less or no taxes vs a church that has tons of requirements or hoops to jump through.

> An "Outside the Lines" investigation of 115 charities founded by high-profile, top-earning male and female athletes has found that most of their charities don't measure up to what charity experts would say is an efficient, effective use of money.

https://www.espn.com/espn/otl/story/_/id/9109024/top-athlete...

I'm Christian, and I don't think religious orgs should be tax exempt.

It may have worked well until now, but I worry that in the future it will allow future administrations to threaten tax-exempt status for churches that don't conform their teaching to society's preferences in the moment. Churches shouldn't be in it for the money anyway. We should just rip that entire band-aid off and undo something we never should have done in the first place.

Most of the money there is in hospitals. I don't think it does the economy any good to tax those. Love to hear arguments the other way.

Hear hear. But why not abolish the category completely?

> The U.S. needs a principled, rules-based approach to 1) distinguish between benevolent organizations and tax-exempt businesses,

There’s no reason why a food kitchen, museum, university, church or whatever can’t simply run at a loss in perpetuity (or until it can’t get any more donations). No decision on its tax status is needed.

Charities pay the same price for phone service, postage, salaries, rent etc. Yet we’d have a complex infrastructure for deciding if they should get a break on one line item, taxes. Sawing off that whole infrastructure would simplify things greatly.

I don’t mean to sound like some Libertarian here. It’s just that I’ve long considered the distinction between “non profit” and “for profit” crazy.

There's something weird about the article, as if "1 billion" has been used as a placeholder for a real figure that was never filled in. For example in at least two places it says that the gross and net tax gaps are $1 billion, but the IRS estimates are close to $500 billion.

> The majority of tax-exempt organizations today are business-like in form and function, including credit unions, hospitals, utilities, insurance companies, universities, professional athletic associations, golf clubs, and consulting firms, to name a few.

Missing a big one there. I know that taxing religious organizations would NEVER fly in the US, but.. can you imagine?

Hate to say it but land value tax would fix this.

Can't hide land in an offshore account!

Don't most economists think that corporate profits should not be taxed? (When all else is held equal.) By that argument, the real problem is taxation of the profits of for-profit corporations...

America has a spending problem not a taxation problem.

That said, it's insane how many 501(c)(3)'s somehow manage to operate as legal or ethical organizations.

OpenAI is the best example haha.

Non-profit tax exemptness is good actually. It incentivizes charity over profit-seeking ventures. Changing this would increase taxes in the short term but be bad long term.

A lot of complaining about the tax exempt economy, but almost nothing about large corps that get away with deferring taxable income; and would lead to much fewer grants and dues from these companies that pay the Tax Foundation's bills.

The Tax Foundation glosses over, and sounds defensive, over the swiss cheese rules for corporations right now. A lot of us have been discussing a tax credit that Congress recently changed that only large tech companies would see a tax benefit to take over the paperwork.

https://taxfoundation.org/blog/corporations-zero-corporate-t...

Then there are flat out tax breaks such as oil revenue being exempted from AMT with generous deductions that normally take other firms years to get.

https://www.investopedia.com/articles/07/oil-tax-break.asp

A few of the organizations they complain about are either owned by the US government, works very, very closely with US govt, or are state institutions. Why should the US tax itself? It just adds more paper work because it would need subsidies. A US Government institution has so many more responsibilities than a private corporation. The real reason is that many large corps want to get rid of the spoiler in their market and already collect even more revenue (make credit unions and the deals they offer go by-by).

Congress enacted these institutions decades ago to stabilize the market and provide access to people the corps did not want to serve. Banks are still retreating from rural areas-think of how much worse it will be if credit unions have to more profit focused.

Taxing state institutions such as universities; this US Supreme Court will not be receptive to that even if Congress does pass a bill; and politically, it is not going to happen.

It’s hard to take the Tax Foundation seriously when they say we need to aggressively go after non-profits when one of their current top articles is handwringing about the Trump tax cuts expiring.

The tax code absolutely needs to be simplified. Corporate taxes are not as efficient as Land Value taxes but if lowered or eliminated it and replaced it with the LVT, what would that even mean for “non-profits” at that point?

With the Congress as rotten and corrupt as it is today, good luck trying to “rein in” anything of this magnitude. I’m sure the bribes will be quite a bit fatter though if they pretend to be interested in solving this problem.

I'm ok with hospitals not paying taxes. In fact it would be great if they got tax credits. Any taxes imposed on hospitals will just make health care cost more and not provide any benefit to society.

Yes... lets make life more expensive by getting rid of taxes.

The reason life is so expensive OBVIOUSLY isn't because of the massive and ever increasing tax burden. NOOOO of course not. Its because people aren't taxed enough.

So lets increase taxes more so we can have goverment solutions to the government problem. Obviously we simply aren't governmenting enough.

Yo dawg... I heard you like government. So I got some government to put in your government!