Anyone else around here willing to support a tax on all foundation endowments, including those of colleges and universities, in excess of, say $1,000,000?
I’d go further, actually, and end the tax deduction for anything that is not directly helping poor people--helping them get health care, food, education, etc. I’m not quite sure where religious institutions would fit in.
Update: A few more points. Wealthy people sometimes give significant donations to Harvard to get their sons into the college. Why should they get to write off the bribe? Second point. It can’t be good that foundations can buy and sell stock without paying capital gains, but everyone else has to. That has to bias the market somehow. And one final point for now. The commentator below has a good point. Charities are perpetuties. In that sense, they are like the aristocratic institutions of the medieval era. America was founded upon prnciples opposed to such things.
I’d go further, actually, and end the tax deduction for anything that is not directly helping poor people--helping them get health care, food, education, etc. I’m not quite sure where religious institutions would fit in.
Well sure - if only "poor people" meant something. In this country, "poor people" means a TV in every other room, cell phones so you can hook up with your gang, and a culture of trying to scam others. I work in health care and see it every day...
I'd go further. Many of these have billion of dollars.
The tax should be applied against their net assets ! I'd recommend at least a tax of 10% per year of the net assets. They can deduct the amount they spent on programs.
For instance, the PEW has more than $4 Billion yet they only spend 4-6% per year or $200-$250 Million. Their tax would be calculated as follows:
$4 Billion x 10% = $400 Million - $240 Million (assume 6%) in program costs = tax of $160 Million.
This would go a long way to plugging our budget gap.
501(c)(3)'s and foundations all have a charted "purpose." their tax-exempt" should apply only to direct expenses associated with that purpose. it should not include any overhead - the large buildings they build, the large salaries they pay their administrations.
for the well-run organizations, this would only tax 10% to 20% of their revenues. a quick google turned up this relevant item - https://www.sos.state.ms.us/ed_pubs/PressReleases/Articles.asp?prno=1897.
the tax-exempt status needs to be refined.
I think it is time. I heard a Lutheran radio host say he would be for it, then he wouldn't have to be so limited in what he can say.
The waters of 501(c)3 organizations are muddy right now. There are so many, how can they be effectively watched for violations? In recognition, some states have made it harder to form an incorporated charity.
It will be good for everybody, for profit and non profit. I for one, am tired of for-profit leaching onto a cause, saying: "buy me! I have a pink ribbon on the box", or "I worry more about your heart than the other company." Just sell me a good product at a good price and I will be happy. Let the bigshots put their own money where they would like and keep me out of it.
Corporate Social Responsibility has gone to far. Isn't that basically what the CRA was? The difference was, banks didn't have the freedom to choose what cause they would partner with.
As you can tell, I'm no financial genius, I'm just becoming rebellious in these political and economic times we are going through.
Great idea, particularly the part about taxing assets. I suggest that the tax on assets be applied based on how much of a distribution from the endowment is made. Perhaps something like "If you use over 4% of your beginning year assets to further the charitable objectives of the trust, not to include excessive salaries or benefits, then you are exempt. Any fraction less than that amount is your tax." For instance, it costs over $40K a year to go to Harvard, but the Harvard Endowment has assets over $35 billion (!) as of the end of 2007. At a conservative 4% return that produces nearly a billion and a half dollars a year in income. Enough to pay $70K to every one of the 20,000 Harvard students. Hell, Harvard should be FREE!
The simplest and cleanest way to do it is to tax the revenue stream of their investments at ordinary income tax or capital gains rate prior to the revenue is applied to ordinary expenses (overhead) of the foundation. In the case of Harvard for example the income of the investment accounts is taxed before the the net revenues is applied to the administrative costs of the university and before whatever of those revenues is applied to student aid.
Non profits remind me of the religious institutions during the middle ages. While some monasteries were quite worthy, others swallowed up land and power and stifled economic growth....tax them!
It has been a little while, but remember reading in WSJ that connected individuals can use the endowments of universities and other non-profits to make investments for their own gain and shelter those investments from capital gains taxes.
As a libertarian Republican, even I can get behind taxing these vehicles and level the playing field for all.
I second the motion and I want to add Hospitals.
I've worked in non-profit for pretty much my whole career and I support this. It would discourage over-large endowments, which isolate non-profits from donor and community feedback and discourage transparency. I second clyde_m's suggestion. That would encourage frugal management of non-profits, which benefits everyone.
Taxing not profits is OK but how would one tax a true non-profit? All kinds of ideas but just a more complicated mess.
Churches or religious institutions must not be taxed as that would violate the free exercise clause of the 1st amendment. The power to tax is the power to destroy. Removing the tax exemption for donors would not be unconstitutional although the real use of that exemption is only for those who itemize under our current ridiculous tax system.
Just eliminate the concept of non-profits all together.
Churches, universities, Boy Scouts, everything. All organizations should file income tax returns. Remove the sales tax exemptions also.
And treat their endowments just like a company's assets are treated. There is no need to be punitive, but they shouldn't be preferred, either.
It's high time--and colleges know it. My niece got a scholarship from an Ivy League because they know that the IRS is looking hard at their endowments, which they never spend!
Non-profits have assets of over $900 billion--yes, billion--today. Why don't they take over health care or pay off the deficit instead of investing it and doling it out to leftists?
Greg.
I agree with you about the .gov having the ability to destroy using taxes but I mysefl would have no problem with eliminating the tax deductions for those who donate. I give to good will and my church and I don't claim it on my taxes. I don't think it should be a deduction. I do not support ending Non-Profits though. End the tax deduction and many of the useless ones will die off.
sorry mysefl=myself.
Interesting idea. Where would NGOs that do such things as democracy promotion under grants from USAID or DOS fit into this scheme?
I work for such an organization and we have no huge endowment (none in fact) and usually compete for every grant we receive. Would/should we be exempt from this new tax?