May 27, 2008 | Read Time: 2 minutes
Kelly Kleiman, a lawyer and journalist who blogs as The Nonprofiteer, says she knows she’s “supposed to be horrified” by a New York Times’ article yesterday describing a series of court rulings revoking charities’ tax-exempt status. But instead, she thinks the challenges to charities’ status are long overdue.
Ms. Kleiman thinks a clamping down on charities’ tax-exempt status might prompt a “long-overdue discussion about who’s actually supposed to be providing health care and services for veterans and the developmentally disabled and the homeless and the hungry and everybody else we’ve been pretending can be served by private charity.”
“If in fact nonprofits are doing nothing but taking government payments and providing services — and if in fact there are for-profit businesses doing exactly the same thing but paying taxes for it — then the nonprofits should be deprived of their tax-favored status, whereupon they’ll go out of business, whereupon we’ll finally have to require the government to do what’s really been its job all along. And, frankly, the only way for governments to do that is precisely to raise taxes — for instance, on businesses masquerading as charities.”
But, she notes, charities aren’t exactly a good source of tax revenue. “It shouldn’t take too long (under a Democratic administration) for legislators to figure out that, as Willie Sutton said, it’s better to go where the money is,” she says.
Paul Levy, president of Beth Israel Deaconess Medical Center, a nonprofit hospital in Boston, also thinks the debate about charities’ tax-exempt status is a good thing. Writing on Running a Hospital, Mr. Levy asks his readers whether they’re happy with the current regulations. “Does your answer depend on whether you are talking about hospitals, schools, social-service agencies, athletic organizations, research institutes, or other categories?” He adds: “If you want changes, what are you hoping would be accomplished?”
An anonymous writer zeros in on hospitals and universities, saying they don’t provide services at lower cost than do for-profit institutions. Meanwhile, the organizations pay their executives at rates that are competitive with businesses.
“[E]ither take away their tax exempt status or require that they spend X amount of their endowments per year on providing the services they claim to provide — charity health care on the one hand, and lowering of tuition on the other,” says the writer. “And yes, I would hope to provide some relief to strapped state and federal governments with the taxes that these institutions would then pay — why should I subsidize their endowments with my tax/tuition money, respectively?”
What do you think?
