In recent weeks, The Business Coalition for Fair Competition has taken out half-page advertisements in local newspapers, including the Great Bend Tribune. The ads ask the question “What is the loss of valuation in Barton County created by unfair nonprofit competition?”
The question is vague, and with no hard and fast figures offered, it’s simply rhetorical.
If it had you scratching your head, you aren’t alone. We took some time to break down the content in the ad, and here’s what we found.
The suggestion is that nonprofits that duplicate the services of for-profit companies constitute unfair competition because they are exempt from paying local, state and federal taxes. The Coalition implies that the whole point of this exemption is because nonprofits “provide services that would otherwise be the responsibility of government.”
This is simply untrue. The government taxes organizations that seek to make a profit. Profit is what is left after all expenses have been paid. Nonprofits put “profit” towards the mission of the organization, rather than in the hands of owners or shareholders, and rightfully should be exempt from paying taxes.
The IRS states, in Section 501 (c) (3) of the tax code, exempt organizations are those with missions that are “charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and preventing cruelty to children or animals.” These missions are above and beyond what “would otherwise be the responsibility of government.”
That’s because the responsibility of government is to make and enforce laws and provide protection to the people it represents. Capitalists, rightly, seek to keep markets as free from government control as possible, but in the last century, the United States Government assumed the responsibility of various social programs. Still, at the federal or state level, these programs don’t come close to what nonprofits are able to achieve at the grassroots level.
During the Eisenhower administration, rules were implemented to keep the government from providing products and services produced by the private sector. Whether or not that was a good move is subjective. It did focus government on its actual mission, and it appears to be more fair.
The Coalition’s assertion that nonprofits “should not provide products and services produced by the private sector,” because it fosters unfair competition through subsidies via the tax exemption is faulty logic, however. Don’t be fooled.
Nonprofits are not an arm of government. Taxing non-profits would result in the demise of already strapped organizations who rely on ever more scarce donations.
Sure, for-profit companies can step in, but with a profit motive, the people nonprofits seek to serve aren’t likely to receive that help because they simply can’t afford it.