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The Conservative Case for Taxing Nonprofits
Since conservatives are more charitable and anti-tax then it only makes sense we’d especially dislike taxing charities.
But here’s why I think we should support taxing nonprofit corporations…
It’d simplify our tax code because we’d abolish nonprofits as a tax concept and all its ancillary subcategories and regulations as well as we’d abolish the charitable contribution tax deduction whose total value is overwhelmingly claimed by the wealthy.
“Nonprofit” isn’t in the Bible. It’s an IRS tax concept. If the IRS has to anoint you holy you’re screwed. You’re holy based on whether you’re generous and not on whether you make a profit. — Dave Ramsey
It’d generate more tax revenue, which should be offset with tax cuts elsewhere. Specifically, I’d like to see a 3% gross corporate tax on nonprofits and for-profits in order to abolish the personal income tax for the bottom 70%+ of the population and to abolish the payroll tax.
It’d reduce nonprofit power, which by offsetting this tax with a tax cut of equal-or-greater value then that would mean more power wouldn’t flow to the state, but to individuals, religions (since they’d remain tax-exempt due to the free exercise clause; they’ve been tax-exempt as a matter of default predating the formalization of “nonprofit”), and for-profits (since they’d be competing with nonprofits on more of an equal playing field).
It’d make the tax code less distortionary because the rich currently give a lot of their money to nonprofits in part to avoid a 40% estate tax, therefore, even if a nonprofit isn’t particularly useful a rich person may still find it better to contribute to them because at least they’d get some praise for their “voluntary” contribution. If we lowered the inheritance tax and implemented a gross tax on nonprofits then tax avoidance wouldn’t be as much of an incentive to donate, which means nonprofits would have to be even more effective to attract donations.
It’d make America less leftist because, for one, by abolishing government-defined nonprofits it’d undercut the leftist narrative that somehow making your money via profits is inherently inferior to making your money via paychecks, and two, despite conservatives giving more to charity nonprofits disproportionally donate to Democrats, e.g. BLM, the Trevor Project, the National Center for Transgender Equality, Harvard, Yale, Berkeley, Wikipedia, NPR, Mother Jones, various DC lobbyists, etc.
If you still think taxing nonprofits isn’t particularly conservative then just consider that the 2017 Tax Cuts and Jobs Act (TCJA), which no Republican senator voted against, implemented a 1.4% tax on nonprofit universities’ investment income.
It’d increase economic growth because obviously anything that would reduce the corrosive rot of woke thought is inherently pro-growth, but also because by not disproportionally penalizing profits we’d grow the economy faster since virtually all the progress that has been made in the world has been done for the dough.
prophets profits we trust.
Finally, taxing nonprofit corporations would increase genuine charity because by lowering the incentive/perception of tax avoidance (for the record, I believe the vast majority of giving is benevolent) and regulatory compliance costs for both the giver/receiver (nonprofits spend about 2% on it) then each dollar will come from an even more genuine place to be used more efficiently in the pursuit of good.
With profits we can give.