Today, LibertyGuys criticizes the YMCA:
When a local YMCA decides to build a state-of-the-art fitness center in affluent communities instead of providing programs for underserved individuals and families, the organization is deserting the very elements of the entire community that it is legally bound to serve. When the federal government, in particular the Internal Revenue Service (IRS), does not impose unrelated business income tax (UBIT) on such YMCAs, it forces hardworking Americans to pay more than their fair share of taxes. These YMCAs are free to compete unfairly with for-profit fitness facilities, taking away customers and driving them into financial distress.
These charges don’t stick. Firstly, YMCA’s are not legally bound to “serve the entire community”. Instead, they have goals related to the welfare and health of community members. When a board directors of a YMCA believes it will best serve those goals by building physical recreation facilities, then this is a proper use of donations and membership dues (disclosure: I have been a YMCA member continuously since 1994). This past weekend, I took my kids to the YMCA pool, and my older girl to the YMCA rock-climbing wall while the younger one had fun playing with other kids in the childwatch. We saw friends and played together — this serves the goals of healthy bodies, minds, and families.
Secondly, regardless of what IRS rules are, when the IRS does not impose a particular tax, it is true that tax revenue is reduced for that year. However, it is not true that other people’s taxes are increased for that year. Further, it is only very loosely true that this creates pressure for higher tax rates. As a “LibertyGuy”, surely you realize that calls for “closing loopholes” is really a call for higher taxes, not a level playing field.
I’m really sorry you are heavily taxed. Shouldn’t we be calling for the elimination of those taxes, not the imposition of such a burden on all?
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Gil:
What you’re criticizing is the behavior known as “kissing the whip, ” and bears some relation, as well, to the attitude of the “dog in the manger.” But it’s certainly human–and widespread.
If there were some established and recognized quantity of OPM to which the “servants of the public” and their recipient contituencies were entitled by virtue of their delivery of goods and services subject to market pricing (including competition), then it could certainly be said to be everyone’s obligation to share the burden on some legally-established basis.
But they (and their supporters) are unashamededly, generally vocal in expressing their insatiability; he who feeds the monster on any but a reluctant basis is, in effect, a participant in the oppression of himself and his fellow citizenry.
The legal theory behind tax-exemption for nonprofits is that they “relieve the government” of those duties of serving the public. Obviously, those theories were written by statists because few libertarians would believe that the state has an obligation in providing nonprofit services to the public.
But, in my point of view, the more tax incentives that can be given to encourage individuals to give to charities voluntarily the better. I am ready to “crowd-out” government in the private provision of charity (taking care of the poor, …).
Of course, I don’t think politicians will ever pull government out of charitable works (because they like to control it), it is nice in theory.
Gil,
I am with you on the taxation thing – everyone must be relieved. But while we await Godot, must an independent business be allowed to be out-competed by a(n effectively) state-subsidized competitor?
Whoa, Nellie! I did not say that the YMCA should be taxed to make everything even. Sorry if it was implied but everyone who knows me would realize that I meant that I should not pay those taxes, either. And to extend on what James said, I would gladly “relieve” the government of nearly all of its duties. It was not “instituted among men” to pick winners and losers regardless of how noble the cause. If I (or the YMCA) cannot stay in business and make a profit in a purely free market, then the market should punish me and put me out of business. That’s all I ask.
By the way, your opening quote was not by me. That was me quoting Citizens Against Government Waste.
href=”http://www.cagw.org/site/PageServer?pagename=reports_ymca
Mr. Fogal:
I don’t know where your idea comes from that the tax-exemption of the non-profit entity relies on some recognition oof social servicves rendered at some saving to the government.
It’s much simpler and basic than you contend.
I cannot cite the legal references but will merely state that the main one was the SCOTUS decision of the early 1800s in which I believe the words used were “the power to tax is the power to destroy.” In general, this exempts non-profits from the inroads which might otherwise be made on their property by local taxing authorities. As far as is concerned the exemption of revenues gained in their operation from either local or national income taxation, this is not a matter of specific legal exemption applying to these and no other organizations or individuals. ANYONE who has no income, of whatever category of organization, need pay no income tax, whether Federal or other. The legal framework known as a non-profit is simply that set up by law to assure that the normal operation will not generate any funds which could be identified as “profit” and thus income to the entity subject to tax; individuals receiving funds from the entity are subject to ordinary taxes on their incomes as employees, consultants, contractors, etc.
I have a hunch the letters following your name bespeak some financial expertise. I have none and all of my understanding expressed hearkens to the ordinary content of a high school Civics class of over 50 years ago.
Far as I can tell the only difference of a “non-profit” is that it doesn’t issue stock and have stockholders. The people who control non-profits can still get rich off them. The profit (income less expenses) is paid out in salaries and benefits to employees. Isn’t this why credit unions and mutual insurance companies have not run savings banks and stock companies out of business?
If that’s the case, then why am I not allowed to call myself a non-profit? I’d love to simply take my pre-tax revenue as income but for some strange reason, the IRS laughs at me when I suggest it.
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