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

• jdonaldson 2y ago
  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.
  • dmckinno 2y ago
    Healthcare is a slippery slope. Don’t tax hospitals, but tax pharmaceutical companies? Don’t tax pharmaceutical companies, but tax the income of doctors? I think the point of the article is that it’s really hard to make these judgments and doing way with the whole system entirely makes the most sense, which seems reasonable to me.
    • willcipriano 2y ago
      "Best I can do is tax you like you have socialized medicine[0], then force you to pay 2 - 4 fold what those other counties private systems cost to actually get care for most of your life." - Every politician in my entire life time [0]https://data.oecd.org/healthres/health-spending.htm https://data.oecd.org/healthres/health-spending.htm
      • ceejayoz 2y ago
        Quite a few politicians suggest we take one of the various approaches the rest of the OECD countries do, as they're clearly more cost-efficient... but that gets derided as socialism.
        • willcipriano 2y ago
          Then they vote for another war instead. They also never make the point that we are already paying for it. They want to tax me more, when if they were as efficient as the NHS I'd have two healthcare systems with money left over. Medicare for all will never see the floor until everyone currently over 60 is gone, at a minimum. They are all in on it.
          • ceejayoz 2y ago
            The US can clearly afford both, as your chart demonstrates. It shows we pay more in tax than the other OECD countries pay in total, including taxes for healthcare. We've picked the least efficient worst-of-both-worlds scenario out of a fear of anything that sounds like socialism ("public option", "Medicare for All", etc.).
            • willcipriano 2y ago
              Its corruption. Explain it in the terms I have on the national debate stage, everyone is on board. NHS style healthcare AND lower taxes. You'd win every election, but you'll never see that stage.
              • whoitwas 2y ago
                No one would win anything. Money wins elections. If you had this platform and money, you find an early grave.
                • deleted 2y ago
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            • antisthenes 2y ago
              > The US can clearly afford both, as your chart demonstrates. The chart doesn't demonstrate anything of the sort. By definition, sovereign governments can afford literally anything, since they can print the currency within the country. It will just cause inflation. That statement is complete and utter reductionist nonsense.
              • deleted 2y ago
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              • ceejayoz 2y ago
                We are currently paying for both. The fact that our current setup costs 2-3x any other OECD nation indicates reform to be more like their systems is likely to reduce costs, not increase them.
    • csdreamer7 2y ago
      > Don’t tax hospitals, but tax pharmaceutical companies? Hospitals, to maintain their nonprofit status, have to provide charitable contributions. One way is when patients apply for payment reduction or discharge because they can not afford to pay. Patients need to apply for this so they have documentation to give the IRS. > Don’t tax pharmaceutical companies, but tax the income of doctors? How often do you ask a doctor to work for free? They still get paid by the hospital. Yes, pharmaceutical companies, which as far as I know are private, also have something like this. This is preventing media coverage and Congress imposing max cap on prices on public assistance programs (prices private insurance will use for leverage) so they can keep charging what they want. > I think the point of the article is that it’s really hard to make these judgments and doing way with the whole system entirely makes the most sense, which seems reasonable to me. The point of this article is to attack the nonprofit competitors to their due paying members. They gloss over many details and as I posted elsewhere; they even defensive of the tax loopholes of their due paying members.
      • FireBeyond 2y ago
        > How often do you ask a doctor to work for free? They still get paid by the hospital. Oftentimes, physicians are not paid by the hospital at all. They will form consulting groups and work for the consulting group which will have a contract with the hospital, or they'll do something C2C.
        • csdreamer7 2y ago
          > Oftentimes, physicians are not paid by the hospital at all. They will form consulting groups and work for the consulting group which will have a contract with the hospital, or they'll do something C2C. This is a red herring. The hospital still pays for a service (doctors or a group representing them) while being required to make charitable contributions to keep it's nonprofit status. These charitable contributions are very important for people in poorer and rural areas of the United States that for profit entities do not want to operate in (or would demand subsidies from the government to operate in).
  • bagels 2y ago
    I think it's hard for people to reconcile $1000 10 minute doctor visits, and $10,000 IVs with tax free status.
    • steego 2y ago
      Or you could look at Kaiser Permanente, which is the exact opposite of this and the biggest nonprofit cited in this paper. Unless you go to 3rd party provider for a non-emergency, you will never get hit with this type of nonsense. Everything is reasonably priced. It’s a nonprofit organization that handles the financing and providing healthcare services which gives them an incentive to manage costs. The ACA marketplace gives them an incentive to provide good service because you can always sign up for different insurance at the end of the year if you don’t like the care they provide. Personally, I suspect this study was sponsored by the big health insurance companies who want to get in the same game.
    • supertrope 2y ago
      While the exact line items are made up the money to pay nurses ultimately has to come from somewhere.
  • softfalcon 2y ago
    It's called universal government provided healthcare. We have it in Canada. Gets rid of that nasty, unnecessary, "for profit" medical sector. Though, I think that may actually be as-large or a larger problem for America than non-profit taxation/exemption policies. You have to admit, you could clamp down on the other crap easier if healthcare being a "non-profit" wasn't such a big deal due it just being managed by the government.
  • EasyMark 2y ago
    I think mostly what we need is transparency for nonprofits, list of all salaries, expenses, capital expenditures, bonuses, etc before one can really say what makes sense. Including for “customers” (patients). If you know how much it takes to run a nonprofit then people will begin to understand if they are price gouging or if there’s some huge expense that the general public is unaware of. We need the light of day put on these ventures so they can’t hide info AND keep their nonprofit status. For example, I wish we were much harsher on religious non profits that get mixed up in politics and support candidates and parties, they should lose their tax free status immediately.
    • imgabe 2y ago
      They are already required to report this aren’t they?
• guntars 2y ago
  > 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?
  • babypuncher 2y ago
    I'm OK letting religious institutions keep their tax exemption, but we should make them adhere to the same standards as 501(c)(3) organizations (non-profits). A whole lot of churches would either start paying taxes, or expose themselves as frauds with those financial transparency requirements.
    • r00fus 2y ago
      This exactly - the existing hypocrisy leads to religious organizations essentially being tax-exempt political organizations.
    • nickpeterson 2y ago
      I think you’re right, but it’s probably better to try and remove their exemption and then settle on this. They’ll scream either way because unethical hucksters will do anything to keep fleecing people.
      • edmundsauto 2y ago
        It might make them feel even more empowered to inject their religious beliefs into politics. Nowadays there is a paper thin pretend curtain around that, I believe, due in part to tax exemption.
    • PopAlongKid 2y ago
      There is a loophole where a religious organization doesn't even have to file any paperwork with the IRS to establish its tax exempt status. While $5,000 doesn't sound like a lot, that limit was probably set many years or decades ago and never adjusted for inflation (so the original intention could well have been a much higher level of revenue). "Tax Exempt Organization Search (Pub. 78 data) is based on information received in applications seeking recognition of exemption under Internal Revenue Code section 501(c)(3). Churches, their integrated auxiliaries, conventions or associations of churches, and public charities whose annual gross receipts are normally not more than $5,000 may be treated as tax-exempt without filing an application. Also, many churches are included in group exemptions (see below). Thus, they may not be listed in Tax Exempt Organization Search (Pub. 78 data)." https://www.irs.gov/charities-non-profits/contributors/other-eligible-donees https://www.irs.gov/charities-non-profits/contributors/other...
• brink 2y ago
  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.
  • wang_li 2y ago
    What would that even look like? Gift taxes are paid by the giver not the recipient. Currently you don't even have to report it if it's less than $18,000 per year per recipient. If you give less than $13 million in your lifetime you don't have to pay any gift taxes anyway. I have a feeling that most people probably don't give $18,000 to their churches annually. At a 10% tithe rate, that's $180,000. Wel above the median household income.
    • bombcar 2y ago
      Donations to correctly setup churches (and some but not all non-profits) can be tax deductible from income.
      • loco5niner 2y ago
        For me that's only true if I itemize. With the standard deduction being $29,200 for me this year, that's a tall hurdle. And at that, the only benefit is any amount over the standard deduction.
  • Sohcahtoa82 2y ago
    The way I see it... If we subject churches to taxes, then if you church is paying a significant chunk of money to taxes, then your church is not spending the money on charity like it should be. If your church is spending the money it receives, that spending is deductible. Spend it and you won't pay a tax.
  • mythrwy 2y ago
• Aurornis 2y ago
  > 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?
  • pstrateman 2y ago
    They don't distribute profits to their members. The only thing making them pay tax will do is create an accounting nuisance where they drive profits and thus taxes to zero.
    • chrislloyd 2y ago
      If they drove profits to zero by distributing it to their members, wouldn't that incur income tax?
    • addicted 2y ago
      And how will they do that? You can’t just “drive profits to zero by accounting nuisances”. Otherwise every for profit organization would do that. (Although, separately, this is what IKEA does but they setup an extremely intricate multinational structure to achieve this, and this is what Amazon does, but that required heavy re-investment which only worked because the markets trusted the reinvestment would eventually be profitable and therefore invested in AMZN despite it not showing profits). They’d have to do it by paying salaries or buying products, etc all of which are also taxed, and usually at rates higher than taxes on profits.
      • 2y ago
• francisofascii 2y ago
  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.
  • downrightmike 2y ago
    According to Glassdoor, the average salary for a Catholic priest in the United States in 2024 is $104,699 per year, with an estimated total pay of $206,187 per year. This includes an estimated additional pay of $101,488 per year, which could include cash bonuses, tips, commission, and profit sharing. https://www.glassdoor.com/Salaries/catholic-priest-salary-SRCH_KO0,15.htm https://www.glassdoor.com/Salaries/catholic-priest-salary-SR...
    • francisofascii 2y ago
      I don't think that figure is accurate. Most priests make under 100K. And priests are taxed as individuals, not as non profits, so I am not sure of the relevancy.
    • svieira 2y ago
      The fact that the second entry on that list was "Baptist Hospital" makes me slightly suspicious of the validity of the data.
    • laweijfmvo 2y ago
      sorry, what "profit" sharing??
    • ecshafer 2y ago
      Priests are taxed as individuals so this doesn't seem relevant. But besides the fact that glassdoor's salary estimates are at best ludicrously off. Several of the top companies for "Catholic priest" on that page are protestant organizations, so I will take this with a grain of salt.
• gumby 2y ago
  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.
  • readthenotes1 2y ago
    It's another complication in the tax code for the cognoscenti to exploit
  • spyckie2 2y ago
    Policy is not always about how much tax one pays, it's about landscaping your society. The difference between a town with unique, local shops and a town with sprawling landscape of walmarts is the policies of those towns, one of the big ones being tax code. Policy is just a way to execute on decisions for what kind of social outcomes your society wants. In this instance, abolishing the category completely is essentially saying we don't want any non-profit organizations to exist as a legal structure, which is probably not the intention. Policy design favors strongly directed outcomes over reducing complexity of legal code (because we have a robust legal institution). So, yes, it is increased complexity. But most complexity is not out of reach. Most small organizations have the budget to handle policy complexity, even if many individuals do not. Ideally, good policy is tested as well and actually creates the effect it was intended for. A great example of bad policy design, IMO, is the plastic bag ban in California. Its intention is to reduce plastic waste, but the actual implementation probably didn't. All in all, it's a deep issue because you can then argue if the non-profit status really creates benevolent organizations AT ALL, or if it just creates tax-exempt businesses. But if you go down that route, you're essentially "joining" in the conversation - it's exactly what this article (or the research behind the article) is trying to figure out.
• Laaas 2y ago
  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.
  • addicted 2y ago
    Unfortunately non profit != charitable. That’s what this article is all about. Separating charitable non profits from non charitable non profits and taxing the latter.
    • Laaas 2y ago
      No, a non-profit is by definition a charity _for something_. It’s a public benefit, and thus not taxed. If it’s not a charity, but uses 501(c)(3), that’s just tax fraud! Tax fraud is already illegal! You read the law at https://www.law.cornell.edu/uscode/text/26/501 https://www.law.cornell.edu/uscode/text/26/501
      • addicted 2y ago
        I deliberately avoided the usage of the term “charity” because the legal definition for tax purposes is indeed different from what people colloquially think of as charities. I used the unwieldy terms “charitable non profit” and “non charitable non profit”, and your link proves me right by explicitly pointing out that charitable organizations are only 1 form of non profit that is tax exempt. > exclusively to religious, charitable, scientific, literary, educational, and fraternal purposes
      • HDThoreaun 2y ago
        Most hospitals are not charities. Theyre run by MBAs and everything is about profit margins
  • readthenotes1 2y ago
    I know someone in real estate who is advised by his wealth advisor to set up an apartment building that gives lower rents to wounded veterans in his small town. That way it would be non-profit and he wouldn't have to pay property taxes and the one or two wounded veterans might get a good place to stay but he would be making bank with the other tenants
• ProllyInfamous 2y ago
  [flagged]
  • loco5niner 2y ago
    When I tithe to my church, I've already been taxed on it. It would be a real bummer for it to be taxed again.
    • AnimalMuppet 2y ago
      You're not taxed on it if you deduct your charitable contributions. (Presuming you're in the US, and don't make so much that you're under Alternative Minimum Tax, and maybe a few other assumptions...)
      • loco5niner 2y ago
        Yes, but only if I itemize. With the standard deduction being $29,200 for me this year, that's a tall hurdle. And at that, the only benefit is any amount over the standard deduction.
• egh 2y ago
  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.
  • bombcar 2y ago
    You can pretty closely simulate a non-profit with a for-profit enterprise with a bit of "clever accounting" as long as you're not taking profits out. Once they come out, they get taxed, as salary or distributions. What the for-profit ALSO gets taxed on is "income" but if you manufacture expenses you can keep your income low or non-existent (this is what companies do when they transfer their IP to a tax haven and then charge themselves for it).
    • gamblor956 2y ago
      You've just suggested tax fraud, and the mechanism you referred to is no longer a viable method for accomplishing it...
  • oceanplexian 2y ago
    It’s ridiculous we are trying to find more ways the government can rent-seek. Corporations are taxed on profits, they are taxed when they pay employees, the employee is taxed on their income, and the employee’s post tax dollars go to pay sales tax, the remaining money goes to businesses that pay tax, and then the whole thing repeats again. The government is a literal parasite on the economy. I am repeatedly surprised when people argue that lower taxes don’t improve the economy, it’s as obvious as water being wet or the sky being blue.
    • EasyMark 2y ago
      I think it’s because most people who declare “less taxes are good for the economy” don’t want to pay taxes at all and would be willing to let infrastructure and society rot in order to make a few more dollars. There has to be an optimal level, and surely it isn’t always “less”.
• deleted 2y ago
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• kemotep 2y ago
  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?
• jeffbee 2y ago
  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.
• csdreamer7 2y ago
  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-tax/ 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 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.
• jedberg 2y ago
  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.
  • rqtwteye 2y ago
    Yes, let's pump even more money into an already obscenely overpriced system.
    • jedberg 2y ago
      The assumption is that any credits would be tied to lowering costs for patients.
      • Analemma_ 2y ago
        And that assumption is insane.
      • rqtwteye 2y ago
        Lowering cost for patients is not an objective of this system. They will take the money and pay their execs and shareholders more.
        • beaeglebeachedd 2y ago
          Do non profit hospitals really pay out dividends to shareholders?
          • rqtwteye 2y ago
            They pay out big money to execs and give BS contracts to their friends.
• tmpz22 2y ago
  > 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-athletes-charities-often-measure-charity-experts-say-efficient-effective-use-money https://www.espn.com/espn/otl/story/_/id/9109024/top-athlete...
• ein0p 2y ago
  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.
• wernercd 2y ago
  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!
  • apsec112 2y ago
    US taxes as a percent of GDP are close to post-WWII lows https://www.crfb.org/blogs/2023-revenue-plunge-confirms-2022-surge-was-fluke https://www.crfb.org/blogs/2023-revenue-plunge-confirms-2022...
• nycticorax 2y ago
  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...
  • mcmcmc 2y ago
    No, that’s a wild generalization. Some economists think that. Some are paid to say it. And many more think the opposite.
    • nycticorax 2y ago
      So I guess I got that idea from this podcast: https://www.npr.org/sections/money/2012/07/19/157047211/six-policies-economists-love-and-politicians-hate https://www.npr.org/sections/money/2012/07/19/157047211/six-... which is entitled "Six Policies Economists Love (And Politicians Hate)". In their list of the six policies, number 3 is: "Eliminate the corporate income tax. Completely. If companies reinvest the money into their businesses, that's good. Don't tax companies in an effort to tax rich people." They surveyed a panel of five economists that (allegedly) span the political spectrum. And they all agreed, and said that most economists agree with, this policy. So I'd be curious to hear what evidence you have for the claim that "many more think the opposite".
  • ls612 2y ago
    Corporate profits being taxed at a different rate than capital gains tax introduces some weird incentives to corporate investment decisions. But that isn’t saying it should be zero.
• throwaway383492 2y ago
  [dead]
• adverbly 2y ago
  Hate to say it but land value tax would fix this. Can't hide land in an offshore account!
• elintknower 2y ago
  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.