Thursday, February 18, 2010

Time To Tax Non-Profits

Politicians will resort to off balance sheet tricks such as Greece's recent admission, celebrate the Fed's "earnings" and dividend to the Treasury, and defer reality until retirement. If they admit that we face problems, more time will be spent blaming someone else than is devoted to solving the dilemma. Serious cost cutting will stay off the table until near the brink.

What can Washington do now that is politically palatable? Raise taxes on the rich is the likely answer. But if taxes are to be raised it should be on the untaxed. I'm not talking about the poor and undocumented immigrants. I'm suggesting the non-profit world. There is a huge swath of American business that isn't taxed due to their form of organization.

Credit Unions used to be mom and pop operations that served factory workers and were manned by volunteers. Now they represent a huge, untaxed portion of our financial system. It's not fair and doesn't generate tax revenue. Bankers would provide cover for the administration on this revenue enhancer. Goodwill Industries does worthy work training the handicapped, but they run an untaxed retail business of significant size. Non-profit hospitals compete with tax paying hospital companies. The list can go on longer than my typing stamina.

If tax increases are required, tax the untaxed. Cuts in spending, not in the rate of growth, are the best idea, but our elected officials don't have the gumption to do what is right. Next best is the tax changes I've proposed.


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