Without the rich, non-profit organizations would be relatively scarce. The previous statement isn’t ideological as much as it’s merely a statement of the obvious that whether the arts, ideas, health, and countless other worthy causes, they generally require patrons. Except that there’s a growing amount of controversy in what’s seemingly obvious, innocuous, or both.
Consider the view that non-profits should be relieved of their status that spares them from taxation. That's how Tax Foundation President emeritus Scott Hodge sees it. The speculation here is that he could be convinced otherwise.
Explicit in Hodge's thinking is that since non-profits aren’t taxed, the tax dollars not collected from them must be made up elsewhere through higher taxes elsewhere. The view is difficult to countenance, after which it's surprising in consideration of how many conservatives believe it.
To see why, contemplate the correct conservative assertion that corporate taxes and capital gains taxes amount to the double and triple taxation of wealth. As readers will hopefully soon see, there’s a connection between the latter and the presumption that non-profits shouldn’t be tax exempt.
Lest we forget, corporations as taxpaying entities are a fiction. Their shareholders pay every cent of the tax.
Having already paid a federal income tax, the corporate tax amounts to a second tax on the earnings of the rich. And shareholders are certainly rich. As MSNBC routinely reports as a way of oddly demonizing the well-to-do in the eyes of their well-to-do viewers, “The top 10% of Americans hold over 87% of corporate equities and mutual fund shares,” while “The bottom 50% of Americans own roughly 1% of stock market wealth.” And the taxation doesn’t stop there.
Having taxed the earnings of the rich twice already, the federal tax code gives Congress yet another swipe at the proverbial stuffed pinata with the capital gains tax. Assuming any returns on investments in corporations, the federal tax penalty levied on those returns is 20%.
Pivoting back to non-profits, the notion that their existence comes at the expense of taxpayers borders on absurd, only to cross it. Accepting what is once again true, that the rich are the primary sources of funds for non-profit organizations, how odd that conservatives would make a case against the tax-free status of organizations given life by the rich.
The belief suggests that triple taxation of wealth by the federal government isn’t enough, that having helped itself to the income, shareholder income, and capital gains of the well-to-do, government should be able to arrogate to itself powers of quadruple taxation.
If it’s accepted as true yet again that the rich are the primary sources of funds for non-profits in addition to corporations, then it’s no reach to say that taxation of non-profits would amount to yet another way for Congress to help itself to yet another percentage of the wealth created by the rich. Yes, quadruple taxation.
Which is why the tax status of non-profits should not be up for debate. As a report from then Washington Post fact checker Glenn Kessler indicated in 2024, the top 400 richest Americans pay more federal taxes annually than “the bottom 70 percent of taxpayers combined.”
Kessler’s facts tell us many things, and none of them indicate a tax revenue problem for the federal government. Logic says quite the opposite, that soaring tax collections from the rich enable much greater amounts of borrowing, at which point it would be obnoxious folly to open yet another tax revenue stream from the wallets of the rich to the federal government.
