The Case Against the Charitable Deduction

Alex Muresianu

Alex Muresianu is an economics student at Tufts University, and he has written for The American Conservative, the Washington Examiner, and The Federalist.

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44 Responses

  1. Oscar Gordon says:

    I’d much rather we go after deductions before raising the rate. I wouldn’t want to eliminate the charitable giving deduction entirely, but limiting it to citizens (not corporations) and capping it at a percent of gross income seem like smart things to do.Report

    • pillsy in reply to Oscar Gordon says:


      But really, actual tax revenue-neutral tax reform is a thing we should do and never will.Report

      • Oscar Gordon in reply to pillsy says:

        I’m not necessarily opposed to both, but I’d rather attack deductions long before raising rates. Especially deductions that are most easily leveraged by the wealthy. The one thing I’ve learned as my wife and my salaries have climbed is that there is a large gap between when you lose access to the low end credits and deductions, and gain the ability to easily use the high end credits and deductions. Before my taxes go up any more, I’d rather we start eliminating the high end deductions and credits.Report

  2. Jaybird says:

    Out of curiosity, how much revenue did you think that the pop tax in Philly would raise?Report

    • Alex in reply to Jaybird says:

      I wasn’t paying attention to it when it passed, but it has greatly underperformed expectations.Report

      • Jaybird in reply to Alex says:

        Yeah. That’s a dynamic that I think would repeat here.

        If we’re going to remove the charitable deduction, I think we can’t do it in service to how much money it would raise for the government.

        “We need to remove charitable deductions because the government needs to purchase more drones” strikes me as a decent jab.

        If we remove charitable deductions, I think it has to be done under cover of social engineering. “Too many charitable deductions are going to churches. We figure that by getting rid of this, it’ll hit the mega-churches hardest because people going to poor churches tend to take the standard deduction. So, in an effort to break up the mega-churches, we need to eliminate the charitable deduction.”Report

        • North in reply to Jaybird says:

          Too much Dreher bait in that; it presumes that most liberals think that way about going after churches which I doubt (and certainly hope isn’t the case).Report

          • Jaybird in reply to North says:

            Are you familiar with the argument over removing non-profit status of churches?

            (That said, I don’t know how “most liberals” feel about anything anymore.)Report

            • North in reply to Jaybird says:

              I’m aware of it, yes indeed, just as I’m aware of the argument that Christian integralism should be the policy of the political right. Oddly liberals and leftists all get accused of being rabidly anti church because centrists and conservatives can find rabidly anti-church and pro-church-taxation voices on the internet but it’s crazy to think that Christian integralism is a widespread desire on the right and among conservatives even though I can find Christian integralists on the internet. It strikes me as somehow unfair.

              As to how liberals feel? I mean there’s an awful lot of us (including you!) so it’s hard to make a blanket statement on the matter but I haven’t personally seen much in the way of any concerted movement to remove churches tax exempt status or otherwise politically terrorize them. I’m pretty sure it’d show up on the news if they did. It’d certainly show up on the right wing sites yet Rod only ever seems to be able to depend on university professors or twitter twits to back up his assertions that it’s imminent.Report

              • Jaybird in reply to North says:

                Well, we’re discussing getting rid of the charitable deduction.

                I don’t think it’ll raise anywhere near what the author of the post thinks it’ll raise which leaves us with “well, what do we want getting rid of the deduction to actually do, if raising money wouldn’t be the goal” questions.

                What would getting getting rid of the deduction actually do?
                Is that what our goal actually is?Report

              • North in reply to Jaybird says:

                I tend to agree with that. It might still be a good idea in the cause of simplicity though.Report

    • PD Shaw in reply to Jaybird says:

      I think this is an unfair question. To the extent the pop tax was supposed to be a pigovian tax, the intended outcome was to reduce demand for pop, potentially resulting in no net increase in revenue. The benefit should have been measured as an increase in health.

      That the mayor thought it would increase revenue means he was not doing this right. He should have built a wall to prevent shopping in the suburbs for one thing.Report

      • Jaybird in reply to PD Shaw says:

        My question was more along the lines of “all of the predictions made about that tax turned out to be startlingly incorrect… you’ve made predictions here… how did your predictions do last time?” rather than any comment about pigovianity.Report

  3. Brandon Berg says:

    The charitable contributions deduction benefits higher-income earners in several ways. For one, it’s an itemized deduction, and itemized deductions primarily benefit wealthier filers, while lower-income taxpayers tend to choose the standard deduction.

    There’s something deeply perverse about this claim, as if it just weren’t fair that those rich fat-cats are hogging all the itemized deductions. The reason lower-income people tend to take the standard deduction is that it’s a better deal for them than the itemized deduction is. They don’t itemize because they get something better. High-income earners’ advantage when it comes to itemized deductions is further magnified by the fact that they have the dubious privilege of being subjected to extra-rapey marginal rates.

    As such, even though middle- and lower-income people donate a larger share of their income to charity

    This isn’t true, and the article you link to doesn’t even claim that it is. The linked article is about changes in giving during the Great Recession, and doesn’t say anything at all about the baseline rates of giving.

    Furthermore, this claim is contradicted by other claims you make in the very same paragraph:

    In 2010, 65 percent of the total amount of charitable deductions were claimed by households earning more than $100,000, and in New York state this year, half of all the tax dollars were deducted by the top 0.5 percent of tax filers, who earned $1 million or more.

    The top 0.5% of filers make, much, much less than half of all income, so if they’re claiming half of the charitable deductions, they’re donating much more than average as a share of their income.

    In general, I think it’s reasonable to make some reforms of the charitable deduction, so that it can’t be used for donations to things that are essentially middle- or upper-class hobbies or social clubs *(including churches, unless the funds are earmarked for actual charity), but if billionaires like Bill Gates and Warren Buffett want to donate their fortunes to alleviate third-world poverty, or fund medical research, or other legitimately charitable purposes, I don’t want the government to take a huge bite out of those donations and use it to fund middle-class welfare.

    Under the current tax code, there are plenty of deductions and other tax breaks that one could go after well before ever raising the top marginal tax rate.

    A good place to start would be finishing off the SALT and mortgage interest deductions.Report

    • Road Scholar in reply to Brandon Berg says:

      As such, even though middle- and lower-income people donate a larger share of their income to charity

      This isn’t true, and the article you link to doesn’t even claim that it is.

      I think you’re correct here, but I believe the opposite claim is actually true as a percentage of wealth.Report

      • Brandon Berg in reply to Road Scholar says:

        I’m confused about what the “opposite claim” is. You mean that people with less wealth give more as a percentage of wealth? That’s somewhat plausible, but I’m not sure how much it means. A lot of people have decent incomes but no wealth because they don’t save; if you have zero net worth and donate $10 to charity, that’s like…infinity percent of your net worth.

        People with high wealth tend to have low income-to-wealth ratios, and vice-versa. If you have a 1:1 wealth-to-income ratio (say, $100,000 in savings and $100,000 income), donating 2.5% of your wealth ($2,500) to charity isn’t a huge deal, because it’s also only 2.5% of your income. If you’re retired with $10,000,000 in the bank and following the 4% rule, that gives you $400,000 in spendable income. 2.5% of your wealth is over 60% of your income. Which still leaves you $150,000, so it’s not like you literally can’t afford it, but it’s still a much larger share of your total income.Report

  4. CJColucci says:

    Almost all tax-policy nerds have long favored broad-based, low-rate income taxation — to the extent that we rely on income taxation rather than, say, a VAT* — with few deductions and treatment of various types of income similarly. Almost no actual taxpayer favors this, generally for self-regarding reasons. (My mortgage will be paid off by spring, but I still lose out on SALT and business expense deductions I used to get, though my accountant’s rough estimate from last year is that my overall tax bill will come to about about the same this year anyway.)

    * For reasons I don’t pretend to understand, economists and tax policy wonks tell us that, ultimately, all forms of taxation ultimately work out as disguised consumption taxes anyway. I used to think that we’d eventually go to a VAT because Democrats would realize that it’s a money machine for funding the social safety net and Republicans would realize that it’s regressive. Instead, it appears that the opposite has happened: we don’t have a VAT because Democrats realize that it’s regressive and Republicans realize that it’s a money machine for funding the social safety net.Report

    • Brandon Berg in reply to CJColucci says:

      For reasons I don’t pretend to understand, economists and tax policy wonks tell us that, ultimately, all forms of taxation ultimately work out as disguised consumption taxes anyway.

      It’s pretty simple: The whole point of earning money is that it allows us to consume, and the reason we don’t like paying taxes is that it limits our ability to consume. The problem with income taxes is that they tax future consumption much more heavily than present consumption, and thus discourage saving and investment.

      Almost all tax-policy nerds have long favored broad-based, low-rate income taxation

      This is why this recent basic income mania drives me nuts. A basic income narrows the tax base and increases marginal rates, exactly the kind of foolishness we left behind in the 80s.Report

      • Oscar Gordon in reply to Brandon Berg says:

        So what would you prefer, a zero income tax (or one that doesn’t kick in until the higher tax brackets) and something akin to a VAT?

        Assuming that we want to fund the government, obviously.Report

        • On the individual side we collect almost enough information to convert the income tax into a progressive consumption tax. The biggest change would likely be that all of the distinctions between types of income would go away. The hard part of my taxes is separating the income into the relevant piles; once that’s done, the table look-ups are trivial.Report

        • Brandon Berg in reply to Oscar Gordon says:

          A VAT would be good, plus pigovian taxes on pollution and other major negative externalities. If we must have progressivity, I’d prefer a progressive consumption tax as Michael Cain alludes to. This is basically what you get if you keep our current personal income tax system but add unlimited IRA contributions with no penalties for early withdrawals.Report

      • James K in reply to Brandon Berg says:

        This is why this recent basic income mania drives me nuts. A basic income narrows the tax base and increases marginal rates, exactly the kind of foolishness we left behind in the 80s.

        On the other hand, a UBI could substantially lower effective marginal tax rates for low-income people.Report

        • Brandon Berg in reply to James K says:

          Would it really, though? Fundamentally, you’re dealing with the same problem: If you’re giving $x in benefits to someone with no market income, and you want to phase those benefits out completely for someone with $y in income, you need an average tax rate of x/y. So if someone with no job gets $20,000 in benefits and you want no net benefits awarded to someone making $40,000 in market income, you need an average implicit 50% tax rate on the first $40,000 of income.

          UBI doesn’t address this problem at all—it just aggravates it by eliminating work requirements. If we want to replace all means-tested benefits with a $10,000 UBI and phase it out by $40,000 in income, we can get by with a 25% marginal tax rate on the phase-out, but that’s going to be a huge cut in benefits to a single mother getting EITC, Medicaid, food stamps, housing assistance, subsidized child care, etc., so then we have to keep all those programs, and now we’re back to having the welfare cliff and/or high marginal tax rates on the phase-out.

          If we have poorly designed phase-outs that create welfare-cliffs and 93% implicit marginal tax rates in certain income ranges, that’s just a problem with badly thought-out phase-outs, and not a compelling argument for a UBI.Report

  5. Zac Black says:

    This sounds like a reasonable proposal on the face of it. But here’s the question that just occurred to me in response to it: why is it that the left is always so focused on taxing income, when it seems like what we should be taxing are assets? This is where I feel like if anything, AOC’s proposed policy is actually considerably to the right of my preferred policy: it’s not as though the ultrawealthy are getting their riches in the form of paychecks. Her proposal would affect, what, a few thousand people at best? I like where her head’s at but if we’re gonna do this thing, let’s get serious and go after the real money.Report

    • North in reply to Zac Black says:

      It’s difficult to hide income because you’re getting it from someone/thing else and they’re obligated to report it. It’s very easy to hide assets.Report

      • Jaybird in reply to North says:

        The asset floor that I’d seen kicked around was something like 50 million (with another bump at 1 billion).

        This changes the dynamic somewhat. It’d be easy to hide, oh, a million or three.

        50 million is right around the beginning of the “tough to hide” threshold.Report

        • North in reply to Jaybird says:

          Well yeah, once you get up to that amount of money it isn’t even so much “Where can I hide my money so the gummint won’t find it” so much as “where can I put my money that it’ll be mostly safe and retain/appreciate in value”.Report

    • Brandon Berg in reply to Zac Black says:

      Because you’re not supposed to eat the seed corn.Report

      • Jaybird in reply to Brandon Berg says:

        That’s the secret to the sudden burst in places like Venezuela. Holy cow! Look at how big the meals are for everybody when we don’t have to worry about the seed corn!

        And it looks good for a handful of years. See? It works! Socialism doesn’t require someplace like Denmark!

        And then the seed corn is gone. And people don’t understand why there not only isn’t anything to eat today but we will have trouble having something to eat tomorrow too. Wreckers, probably. Hoarders. Kulaks.Report

        • Brandon Berg in reply to Jaybird says:

          Socialism doesn’t require someplace like Denmark!

          Them’s fightin’ words.Report

          • Jaybird in reply to Brandon Berg says:

            That’s very much an example of people talking past each other.

            Look at the Denmarkian PM. He’s *OLD*. When he thinks of “socialism”, he probably thinks of the USSR or East Germany. Given that those aren’t examples of *REAL* socialism, we need to look at what USians mean when they say “socialism”.

            Like, look at what he says in your article. “We’re not socialist! We only have universal health care, a year’s worth of maternity leave, and unemployment insurance out the wazoo!”

            Well, when USians say “We want socialism!”, they’re saying “we want universal health care, a year’s worth of maternity leave, and unemployment insurance out the wazoo.”Report

  6. Mike Siegel says:

    I could get behind this. A lot of other deductions should go too, including the mortgage interest deduction, which basically subsidizes expensive homes and the real estate industry. When Reagan slashed rates and eliminated deductions revenues and the share paid by the wealthy went UP.Report

  7. Chip Daniels says:

    There is an implied assumption that the sole purpose of taxation is to raise revenue.
    But of course, it is really used to steer the flows of wealth in favored directions and to favored groups.

    And no one ever really pretends otherwise. And I’m not even saying this is wrong as a concept.Report

  8. DavidTC says:

    @Jaybird above asked what problems we were trying to solve. And he’s right, we’re probably solving the wrong ones.

    So I recently came up with a non-working a way to fix high pay scales for management, specifically thinking about non-profit hospitals and universities. I’m going to relate it despite the fact it doesn’t work, just to show up hard this is: Basically, people who donate to non-profits shouldn’t get to deduct whatever percentage of their money goes to pay salaries. Now, this is actually impossible to do in real time in a sane manner, so what I actually mean is this should be calculated as sorta a five-year running average.

    So let’s say that a non-profit on average takes in $500,000 in a year in donations, and $500,000 in profits from its endowment. And on average the last five years it pays salaries worth $200,000, so we hypothetically say that half of those salaries were from the donations. So $100,000, aka, 20%. So anyone who donated can only take 80% of that donation off their income. (It will be printed on their receipt.)

    This would accomplish two things: It turns charities that are basically owner-less businesses, like non-profit hospitals and universities, where all the money goes out the door in the hands of employees, into much less attractive donation targets, and it means that all non-profits have to _tell_ donors (and everyone) how much all their salaries are. (They already technically have to do this for the top positions, but here they’d basically have to inform everyone who was about to donate to them instead of it being some obscure filing at the Secretary of State.)

    Now, there’s actually a problem with this. Two actually.

    First, it would be trivially easy for charities to hire ‘contracting companies’ instead of employees. We could ban them, but…how, exactly? I mean, it seems entirely reasonable for a large charity to hire a cleaning company for cleaning their offices. Or a caterer to feed people. But, okay, we could count that as salaries also.

    Second, a lot of charities should be basically hiring people to do things. The problem with a non-profit hospital isn’t that it is hiring doctors, the problem is that it’s _charging people_, usually charging perfectly normal hospital rates, so all it’s really accomplishing is removing a layer of profits from the top…and generally handing the profits instead to their employees. Same with a non-profit universities.

    Which, I mean, in general, I entirely approve of. It’s…halfway giving workers ownership of the means of productions! Yes, they can’t make decisions, but there’s no owners sucking out profits.

    The problem is that I’m not sure that we should, uh, stop treating it as a normal business just because it does that. If it makes the vast majority of its money by selling services at market value, and hires people at market value, it’s, obviously, part of the market, not a ‘charity’. People shouldn’t be donating to it for income tax deductions (In fact, it’s weird to donate to it at all), and we shouldn’t be excluding it from property tax, or corporate income tax rules. Now, of course, as it doesn’t distribute profits to owners, it probably should be paying less tax, but there’s still a bunch of rules it should probably be following.

    So the question becomes: How do we distinguish a non-profit hospital from, for an example in my town, where basically the local thift store has a medical practice in th back where they pay (from proceeds from the thift store and donations) for a nurse to come in once a week, and an actual doctor every once in a while, to come in and give medical care to no- or low-income people.

    The difference in my mind is that the nurse and doctor are both seriously underpaid and doing it for basically gas money, and the patients aren’t asked for money. But I don’t know how to make that a law, and I realized what I came up with…would remove tax deductions from donations to them also.Report

    • DavidTC in reply to DavidTC says:

      That thing about market rates made me realize there’s a pretty good way to tell the difference, at least the difference in my head, between a real charity and something that is basically just an ownerless business: If a charity is providing something that costs money, you can just look at the price change vs. the market. For example, if the price of something goes up while the costs of providing it remains the same:

      Actual charities are trying to help people who can’t operate in the market, and thus the market price going up will result in their price staying the same. They are charging money basically for the thing because they cannot operate for free, but they are charging based off their cost, not what the market will bear. In fact, they might bite the bullet and low their price for that specific thing for a bit (And slightly increase them for others) because more people need that thing.

      ‘Ownerless businesses’, meanwhile, will generally just follow the market price. That goes up, their price will also.Report

    • Jaybird in reply to DavidTC says:

      So let’s say that a non-profit on average takes in $500,000 in a year in donations, and $500,000 in profits from its endowment. And on average the last five years it pays salaries worth $200,000, so we hypothetically say that half of those salaries were from the donations. So $100,000, aka, 20%. So anyone who donated can only take 80% of that donation off their income. (It will be printed on their receipt.)

      Holy crap.

      I am in love with this idea.

      Periodically, we get calls to donate to this or that charity. I usually ask “what percentage goes to overhead?” and I’m guessing that, legally, they have to tell me because they always tell me rather than saying “nunya”.

      Sometimes I get charities that say north of 80%. I tell these charities to pound sand.Report

      • JoeSal in reply to Jaybird says:

        Yeah, but how long until the overhead stuff is concealed into the ‘provide’ side of the overhead:provide ratio?

        The abstract thought in this, is if we were dealing with the ‘good society’ in the first place, why would there be this problem?Report

      • DavidTC in reply to Jaybird says:

        I am in love with this idea.

        The idea I specifically pointed out the problem with when I explained it? 😉

        Periodically, we get calls to donate to this or that charity. I usually ask “what percentage goes to overhead?” and I’m guessing that, legally, they have to tell me because they always tell me rather than saying “nunya”.

        The problem is that ‘amount of salaries’ is all well and good for charities that operate via ‘providing goods to poor or sick people’, but is extremely crappy if the point of the charity is to, for example, provide free legal aid to immigrants. If I donate $100 to that charity, and that $100 is a stipend that pays for a few hours of legal advice from a lawyer that normally costs $250 an hour, that’s…perfectly and inarguably a charity, but somehow none of that should be tax-deductible because it was all salary.

        And heck: Goodwill. Granted, people usually donate stuff to Goodwill, but that’s tax deductible also so should be under the same rules? If I donate $500 dollars worth of stuff, should I get no tax deduction because Goodwill basically spends all their money (Well, minus the cost of running the stores) on employing people? This is how the charity is supposed to work, they give jobs to people who need them and aren’t traditionally employable, or need help getting on their feed. That’s literally their model of charity.

        And I wasn’t trying to define the difference between ‘good’ charities and ‘bad’ charities, I was trying to define the difference between ‘actual charities’ and ‘ownerless businesses’.

        There are an infinite way for charities to be bad, and ‘overhead’ is not the greatest indication. In business, it’s how much money goes out vs. how much goes in, but charities are not a machine to turn money into more money, they are a machine to turn money into _charity_, and ‘overhead’ is not a calculatable result.

        I mean, invent a hypothetical charity to vaccinate children for free had basically no overhead. Everyone involved was working for free, and the only expense was to purchase vaccines. And another charity is giving out vaccines to kids too, but they’re having to pay people to do it. The first charity is obviously better, right?

        Except what if I told you the charity with no overhead was vaccinating children for smallpox, and the other second was vaccinating for measles? The first charity might not have any overhead, but it is literally accomplishing nothing at all.

        So, having been thinking about this for a while, I actually think what would be helpful is to have different _sorts_ of charities, based on their ‘output’.

        And in the case of things like ownerless businesses, I actually have a solution to those, too. Not how to identity them exactly, but how to fix them once we do.

        So let’s say there’s a non-profit hospital. What should happen is the non-profit incorporates a for-profit private business that it owns all the stock of, and puts the hospital in it.

        As far as I can tell, this would be legal, as long as the money and corporate ownership are still stuck _within_ the non-profit. Before, they owned a building, after, they would own 100% of the stock of a company that owned that building. They didn’t lose any of their assets, so logically this should be legal already.

        In fact, plenty of non-profits own public stock.(1) This would just be private stock, and they start with all of it.

        And then…they should start giving that stock away. Like all non-profits, they can, of course, only give their assets to other non-profits. In fact, just because they sorta have an inherent conflict of interest as the original owners, they should give every bit of stock away to other local charities, and shut down. If they’re an actual non-profit in the business of helping people, they shouldn’t mind that much.

        And the hospital would be a for-profit hospital and pay taxes and be a completely normal business. It would just have corporate owners that turned around and took any profits and put them towards paying the bills of the poor, or at minimum some other charitable purpose. And now the ‘board of directors’ of the hospital consists of…I don’t know, the head of the local homeless shelter and the head of the free clinic and the the local blood bank and people like that.

        Run the actual business like a business. Just have that business owned by a charity or a dozen charities or whatever.

        1) Fun fact: Emory University owns 1.5 billion dollars worth of Coca-Cola.Report

    • Brandon Berg in reply to DavidTC says:

      Why do we care? If someone with more money than sense wants to donate to a non-profit hospital so that the hospital can pay its staff higher wages, then the government collects taxes on those higher wages instead of the rich guy. It may collect a bit less in taxes because of progressivity, but as you said, doing this is weird, so in the grand scheme it probably doesn’t matter that much.

      The bigger issue, IMO, is stuff like donations to churches, which are basically just tax-deductible membership dues to a club.Report

      • DavidTC in reply to Brandon Berg says:

        Just because donating to these ‘ownerless businesses’ is weird doesn’t mean it doesn’t happen. A lot of non-profit hospitals make a reasonable amount off donations, and a _hell_ of a lot of schools do. In fact, the extremely wealthy donating large amount to extremely rich private non-profit schools they went to is starting to look like a huge problem. Yale has an endowment of _29 billion_, most of which was given to them by people who didn’t pay taxes on it.

        And it’s hard to figure out how Yale is a ‘charity’ or helps anyone besides their own students…who have usually paid to get there. Which is fine, but we normally call entities that only help people who give them money ‘businesses’, not ‘non-profits’. Yale is just a weird ownerless business.

        The question has to be asked ‘Why are we allowing tax-free contributions to go to the operation of what is essentially a normal business?’

        A lot of those also end up getting grants that are intended for non-profits. Yes, that’s a problem with the grant specification, but some of those are hard to change, so it’s been a problem with the hospitals that are popping up and ending up with grants that were really intended for free clinic programs.

        And, of course, the big thing: Property tax. Property taxes are the major way that local government funds itself. The sort of ‘ownerless business’ that I’m talking about have just as much impact on local roads and services, but don’t pay anything to the local government. A few local governments have actually gone so far as to try to negotiate some agreements with them to get ‘payment in lieu of taxes’, but that is voluntary.

        I don’t think a corporate entity where every single person involved appears to be motivated by the normal market behavior (People who interact with it buy/sell things at near market value, employees just work there as a normal job, etc) should actually count as a non-profit. At some point, to be a ‘charity’, people should actually have to be trying to help people _at their own expense_. Not a huge expense, but donating time or effort or money or items that other people end up with, without the expectation of getting paid for it.

        But like I said above, there’s actually a solution to this that would work pretty well: Instead of operating these ‘ownerless businesses’, non-profits can, currently, own pieces of for-profit companies, so they should just do that. They usually do this via just owning some stock, but there’s no reason they can’t own every share of a private company, and operate the company for charitable purposes (and use any profits for charitable purposes) without the company _itself_ being a charity. And I don’t actually think there’s any problem with them voluntarily putting their assets in a for-profit company they then own (And if there is we should fix it.), but what I’d actually like to see is requiring certain specific ones to do that….I’m just not quite sure how to classify them.

        Doing that not only fixes all the tax stuff, but it creates a clear distinction between the business side and the charity side…which is control of the business side. And, like I’d said, I’d actually like existing charities to transfer some of the ownership to _other_ related-ish charities. So the board of directors of the (for-profit) hospital is actually…a bunch of charities.Report

      • DavidTC in reply to Brandon Berg says:

        The bigger issue, IMO, is stuff like donations to churches, which are basically just tax-deductible membership dues to a club.


        ‘Organizations that only are for the benefit of their membership’ aren’t supposed to be 501(c)(3) charities. They’re mostly supposed to be 501(c)(7)s, where things like fraternal orders or amateur sport clubs or fan clubs or even country clubs. (You’ll notice the word ‘club’ a lot in those. 😉 ) They’re still non-profits, but contributions aren’t tax deductible.

        And while charity can have dues, if membership results in any tangible benefit vs. not paying them, the dues aren’t supposed to be tax deductible. But church membership is not based on dues, so that part…sorta is okay. Honestly, the ‘you must tithe or the church will hate you’ is something tends to be incorrectly assumed by people who’ve never really attended church as an adult…generally, no one actually knows who tithes. At all. Tithing tends to happen once a month, often via an envelope. (To get a receipt for tax purposes.) No one’s going to stare at someone who didn’t put something in any particular service, because no one puts in something every service! (Who gets paid weekly?). Now, the church business office will know if someone didn’t give via offering envelopes, and maybe some in some churches that information leaks out, but they could have just tithed without expecting a tax deduction, and some people give tithes directly to outside religious organizations so they can control where the money goes because they have some dispute where the church is sending it. (Maybe that last bit is just ornery Baptists, though.)

        But the ‘this is really just a club’ is true. In theory, churches exist as charity because they are ‘educational’. But the thing is: If the actual goal was to educate people (Presumably educating them about that specific religion.), it’s really hard to see how most of what churches do is supposed to accomplish that goal.

        About the only thing that clearly fits is something like ‘Sunday school’ and ‘Bible study classes’. But not, say, a sermon. Is…is a sermon a lecture? Is that a class? No one seems to be taking notes, this seems like a really bad educational experience. And there’s no test. And…we sing songs? And eat lunch? How is this educational?

        Granted, churches pass through a lot of their donations to other charities, which is also a way for a charity to operate, except a lot of _those_ ‘charities’ have exactly the same problem: What exactly is the Southern Baptist Convention doing for non-Baptists?Report

  9. The Tax Cuts and Jobs Act made some important changes in 2017, like making it OK for members of Congress not to read bills before voting on them by making that physically impossible.Report