Noam Neusner, a former aide to President George W. Bush, has a piece in the nonprofit Jewish newspaper the Forward on taxing charities:
the charities themselves are where the real money is. ... Consider New York City. Its two biggest landowners are the Catholic Church and Columbia University. Neither pays property taxes. They use the roads. They use the police. Why should they get a break on paying their fair share?
And then we can talk about those charitable endowments. Endowments never pay a dime in capital gains taxes. It's as if nonprofits operate in the financial marketplace with a 20% head start over every other investor when it comes to returns. And for what benefit? Most endowments disgorge a puny share of their total assets each year to support actual charitable work. The rest is hoarded.
This isn't just about tax fairness, it's also about macroeconomics. Today, economists worry that the mortgage interest tax deduction has played a major role in the creation of the housing bubble that just popped. They're right: If you can borrow money tax-free, you're more likely to borrow more than is prudent.
The same is true for charitable giving. I don't doubt that many nonprofits do great work, but do we over-invest in them? I wonder what it means that America's fastest-growing sectors — health care and education — are dominated by nonprofits. Do these institutions contribute to our national vibrancy and prosperity the same way a profit-focused private sector does? I don't think so. As a nation, we have a tax code that is very good at encouraging people to give away money. But we are forgetting how to make it.
He writes, "this would infuriate even Warren Buffett, who has magnanimously offered to pay more in income taxes even though he actively (and legally) shelters much of his wealth from taxes by donating it to charity."
