Should Consumers Get a Tax Break for Supporting Businesses That Do Good?

Should Americans be able to take deductions for products and services they buy from businesses whose work creates social good?

Dan Pallotta, writing on his Free the Nonprofits blog, says such a move would “break the 501©3 monopoly on charity” and foster all sorts of for-profit efforts to pursue social good. Mr. Pallotta has long been a promoter of business-oriented efforts to promote social causes: He founded Pallotta TeamWorks, a company that organized fund-raising events to benefit cancer charities and other causes.

Mr. Pallotta says his idea would bring a more entrepreneurial spirit to solving social problems, a spirit Mr. Pallotta says is stifled by risk-averse boards, poor pay, no stock options, and the inability of nonprofit entrepreneurs to own any of what they have created.

Yes, someone could start a for-profit homeless shelter now, Mr. Pallotta acknowledges. But he says the effort would surely fail without the blessing of the IRS and the ability of its donors to deduct their gifts.

Mr. Pallotta says the White House Office of Social Innovation should focus on changing the tax code.

What do you think of his idea?