4 ms·

Hear hear. But why not abolish the category completely? > The U.S. needs a principled, rules-based approach to 1) distinguish between benevolent organizations

by 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.
toast0 2y ago
> 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 mean, they often don't pay the same prices. Recognized organizations often have a lower price option for many services. Landlords often charge below market rent to charities. Utilities often have a lower tariff for charities. Charities may not have to pay sales tax, so the goods they need are less expensive (yeah, that's another tax, but). Nonprofit Mail is printed material eligible to be mailed as USPS Marketing Mail® at significantly reduced nonprofit postage rates. [1] Salaries sure, except there's a good amount of people who will work for less or free, if it's for a charity they find compelling. Qualifying for the break on income taxes drives the discounts on all the other things. [1] https://faq.usps.com/s/article/What-is-Nonprofit-Mail https://faq.usps.com/s/article/What-is-Nonprofit-Mail
- bombcar 2y ago
  From a 10000 foot view, the non-profit designation is the way the government says "the tax we'd get from you, and your cost to file the paperwork, is not as valuable as what you provide, so we'll skip it." It's one of the available "force multipliers" that the government has to try to "cost X but do Y" - just like backstopping loans, etc. It does distort the "market" - that's the whole point.
  - gumby 2y ago
    Actually non-profits to have file just as much annual paperwork as a regular tax return, plus getting the status takes a long time and involves a lot of paperwork too. And if they aren’t making a profit they aren’t paying taxes, regardless of filing status.

by gumby 2y ago

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.

toast0 2y ago

> 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 mean, they often don't pay the same prices. Recognized organizations often have a lower price option for many services. Landlords often charge below market rent to charities. Utilities often have a lower tariff for charities. Charities may not have to pay sales tax, so the goods they need are less expensive (yeah, that's another tax, but). Nonprofit Mail is printed material eligible to be mailed as USPS Marketing Mail® at significantly reduced nonprofit postage rates. [1] Salaries sure, except there's a good amount of people who will work for less or free, if it's for a charity they find compelling. Qualifying for the break on income taxes drives the discounts on all the other things. [1] https://faq.usps.com/s/article/What-is-Nonprofit-Mail https://faq.usps.com/s/article/What-is-Nonprofit-Mail

bombcar 2y ago
From a 10000 foot view, the non-profit designation is the way the government says "the tax we'd get from you, and your cost to file the paperwork, is not as valuable as what you provide, so we'll skip it." It's one of the available "force multipliers" that the government has to try to "cost X but do Y" - just like backstopping loans, etc. It does distort the "market" - that's the whole point.
- gumby 2y ago
  Actually non-profits to have file just as much annual paperwork as a regular tax return, plus getting the status takes a long time and involves a lot of paperwork too. And if they aren’t making a profit they aren’t paying taxes, regardless of filing status.