Already in America, government is tightening its grip on the independent sector. It is challenging the tax-exempt status of foundations making new efforts to “regulate” almost all private groups. An independent sector “regulated” by its competition has, at best, an uphill fight on its hands. . . . The foundation is an instrument forged by citizens who transfer profit from the commercial sector and put it directly to work as risk capital for the general betterment of the society. To say or imply that the foundation exists only on the sufferance of government is to reason from the premise that government is the whole of society.

            —Richard C. Cornuelle, Reclaiming the American Dream

The late economist Benjamin A. Rogge used to talk of “Rogge’s World,” that ideal arrangement of institutions which he would have established had he been in charge (not that he would have agreed to be put in charge if asked). This was a thought experiment he used to consider the implications of better social configurations from a free-market perspective. Rogge, I think, was aware of how difficult and even dangerous it is to approach social reform in a constructivist mode, because of unintended consequences and secondary effects. Institutions have been built up over long periods of time, and countless individuals have made life choices on the basis of existing arrangements. For many, radical changes will bring unexpected and undesired difficulties that will not be obviously balanced by the theoretically improved institutional setting. Nevertheless, thought experiments exploring ideal worlds can demonstrate interesting possibilities and help guide more incremental change. Read More...

The U.S. Internal Revenue Code’s charitable exemption and deduction clearly treat philanthropy favorably; the question for tax theory has always been why, and how well. The traditional subsidy theory has offered no means of comparing the relative goodness of one philanthropic purpose with another, or of comparing philanthropic providers of a good or service with alternative suppliers in the for-profit or governmental sectors. It simply has accepted that all philanthropy, whatever that is, is good, and deserving of favorable tax treatment.

This seems, on its face, to be a serious deficiency, if not an outright vice. On closer inspection, however, we can see it to be an odd virtue born of the need to fit our understanding of charity to our capitalist market economy on the one hand and our liberal democratic polity on the other. If our philanthropy is to be both consumerist and populist, it must be agnostic about both human need and human excellence; it must leave the specification of philanthropy’s dual traditional aims to the market and the electorate. That is the implicit genius of the traditional subsidy theory: it does not fail to specify the goodness of particular philanthropic purposes; it simply leaves that decision to the philanthropic participants themselves, bowing deeply to Tocquevillean democracy. Read More...

Robert Atkinson and William Dennis both critique the philanthropic tax exemption in the United States in a manner reminiscent of Augustine’s early pleas for chastity: “IRS, grant me taxation, but not yet.” Although both essays point to current problems generated by the exemption, the writers recognize that when bad policies are deeply entrenched, the exemption might serve as a coping mechanism. Each of the two essays thus sketches out an (effectively) ideal fiscal regime in which the tax exemption for charities is no more, as well as a few preliminary steps toward the author’s ideal. Dennis helpfully dubs this sort of thought experiment “Rogge’s World,” in which we consider what the merits of a policy might be in a more sensible overall policy regime.

Like Atkinson’s World and Dennis’ World, my ideal policy regime lacks a tax exemption for charitable organizations. But I remain unconvinced of significant portions of their arguments, taking issue with aspects of each author’s depiction and ordering of alternative policy regimes. In the interest of brevity I focus on the areas of sharpest disagreement. That means offering a critique of Atkinson’s ideal (the Good) and a counter-critique of Dennis’ appraisal of the current regime (the Bad). Read More...

William Dennis opens “A Radical Reform for Nonprofit Tax Exemption: A Thought Experiment” with a compelling quote from Richard C. Cornuelle’s Reclaiming the American Dream: “Already in America, government is tightening its grip on the independent sector. It is challenging the tax-exempt status of foundations, making new efforts to ‘regulate’ almost all private groups. An independent sector regulated by its competition has, at best, an uphill fight.…”

Cornuelle’s concern about foundations losing tax-exempt status provides the backdrop for Dennis’ thought experiment on federal taxation and philanthropy: What if the tax subsidy for nonprofits was eliminated? Would this be a good thing? The answer, Dennis posits—at least in theory—is yes. But he recognizes that an abrupt end to tax advantages for the nonprofit sector might do more harm than good. Much of the infrastructure of the independent sector and the life choices of those involved with it, he notes, are dependent on the current constellation of tax incentives. Thus he offers this as a thought experiment with policy implications, but not as a policy prescription. Read More...

Aboard the Arbella in 1630, John Winthrop composed “A Modell of Christian Charity,” outlining a social compact by which the Puritan settlers in the New World might “be all knit more nearly together in the Bond of brotherly affection.” Almost four centuries later, America’s democratic society still rests on a tacit social compact enjoining us to seek to balance and maximize individual liberty, personal responsibility, and the public good. These essays by Robert Atkinson and William Dennis invite us to reconsider the function of government and the impact of modern tax policy on our long-lived social commitment to justice and mercy.

Atkinson and Dennis both take a narrow, but very important, focus on the role of tax policy on philanthropy. They reach the same conclusion: each would eliminate tax subsidization of philanthropy through exemptions (and probably through deductions), even perhaps the tax subsidization of all “nonprofit” organizations. Yet they differ greatly in their rationales for this conclusion and in their positive suggestions for how to better realize the American social compact. In place of the current system of tax subsidization of charity, Atkinson proposes a more progressive tax system that increases taxation and government management to provide the “public good.” Dennis promotes a more market-based approach to both philanthropy and the identification and funding of the “public good.” Both conclusions have noble and virtuous grounding, yet each author raises, but does not answer, questions that lie at the very heart of the social compact. Read More...

The essays by William Dennis and Robert Atkinson suggest possible reforms of the tax treatment of American philanthropy. In this commentary I review and critique their proposals and identify some further problems these potential tax code changes would cause.

As things currently stand, nonprofit entities enjoy two kinds of tax advantages over for-profit entities. These roughly correspond to the expense and revenue sides of the nonprofit balance sheet. Nonprofit corporations need not pay income tax, need not pay property tax on the land and buildings they work in, and often need not pay sales tax. Regarding income (and donated capital) for nonprofits, donations to nonprofits enjoy tax-deductible status. These arrangements have grown up over a number of years through a variety of motivations—a classic camel as a horse put together by a committee. Read More...

For only those organizations which emerge from the initiative and formative powers of their own members enhance the individual existence of their members. . . . It is as impossible to make a gift of independence in the economic sphere as it is in any other.

                        —Otto von Gierke, Rechtsgeschichte der deutschen Genossenschaft¹

Initiative and Philanthropy

The intimate and necessary relation between philanthropy and associational liberty has long been recognized. Perhaps best-known today are those numerous observations about the relation to be found in Tocqueville’s Democracy in America. Examples include, “the most natural right of man, after that of acting on his own, is that of combining his efforts with those of his fellows and acting together,” and, when he does so, the resulting “reciprocal action of one person upon another” “renews ideas, enlarges the heart, and develops understanding” such that the individuals “help one another” (1966, 193, 515, 511). The philanthropic orientation of action, expressed above as the enlarging of the heart and the developing of the understanding when one helps both oneself and another person, was seen by Tocqueville to be a corollary of the necessary, “natural” associational activity of one individual acting together with another. Key to this formulation of the relation—albeit a formulation pieced together from several extracts from Democracy in America but which nonetheless is faithful to Tocqueville’s argument—is the recognition that the cultivation and expansion of both one’s solicitude for another and one’s attention to one’s surroundings arise from the initiative to undertake, with others, the setting right of a perceived deficiency in a state of affairs. Read More...

Introduction

Charities hold a privileged position in our law. They enjoy a freedom from most forms of taxation, and they still hold at least a partial immunity against tort and contractual liability that is fastened upon for-profit enterprises. Charities can also take advantage of legal privileges, procedural and substantive, that are not granted to other private organizations. The doctrine of cy près is perhaps the best-known example, but there are many others. It is often said in legal textbooks that gifts or trusts established for charitable purposes are favorites of the law, and this is no idle statement. Its veracity and consequences are manifested in many corners of our jurisprudence. Almost always it is to the advantage of donors to be able to claim that their gifts were made with a charitable purpose, and the charitable organizations themselves support these claims—no cause for wonder.

But what constitutes a charity, and what is a charitable purpose? What does it take to qualify for these advantages? Sometimes the answer seems obvious. A gift to one’s friends or to the members of one’s family may have a benevolent motive, but it is not charitable in nature. It is a private gift. This is common ground among commentators. A donation to a school, by contrast, even the one a donor attended as a youth, counts as a charitable gift. It promotes an educational purpose, and this is so even if the donor’s motives have a hint of self-interest—they may stand a little taller, for example, if their school is highly ranked in U.S. News and World Report. Still, the alum’s predominant motive is to benefit education. So we count the gift as charitable. What about a gift to the school one’s children attend? That has been a more contentious question in the law, since it lies somewhere between the two. It can help keep the (nondeductible) costs of tuition a little lower for the parents. It gives them more than bragging rights; it saves them money they would otherwise be obliged to spend on their child’s education, at least if other parents do the same. Purposes and circumstances sometimes matter. Read More...

Introduction

When studying the philosophy of property ownership in Jewish law (halacha), the issue of distributive justice arises. Even those who refrain from associating Judaism with socialist ideals explicitly use Jewish law’s approach to the roots of ownership to determine the principles behind the relationship between society and the individual in Judaism (Falk 1980, 117, 119).¹ The more moderate scholars point to Jewish law’s commitment to principles of social justice, which allow the individual liberties up to a certain point while obligating him to be socially responsible and to engage in give-and-take with others. Read More...

Biobanks: Definition, Birth, Typology

The necessity of cataloguing information is apparent in different fields of human activity. In the healthcare sector and the medical field, the need to assemble data on a population appears historically at the beginning of the modern state (ca. the nineteenth century) not merely for statistical reasons but also for the state’s need to control resources which could be found in the surrounding territory (Hacking 1982).

In the twentieth century, the human body has been studied more deeply in terms of each of its components (molecules, cells, tissues, blood, etc.). This has stimulated the establishment of “biobanks” (Loft and Poulsen 1996) that represent a new way “of organizing life, of collecting, storing, and assembling life in the form of human materials” (Gottweis 2008, 24). Read More...

Introduction

The topic of philanthropy has a great deal of philosophical interest because it exists at the nexus of issues surrounding distributive, remedial, and commutative justice, perennial issues in political philosophy (Ealy 2010, vi). It is perhaps because of this that, conceptually speaking, philanthropy seems to have a twilight existence, typically laboring under one of the most prevalent confusions—the synonymous usage of the terms “nonprofit” and “philanthropy” (McCully 2010). Yet, discussion of the philosophy of philanthropy is surprisingly neglected. The present discussion examines the relationship between private philanthropy and the welfare-oriented state: Is it possible for the philanthropic sphere and/or indeed the philanthropic impulse to coexist in an expansive governmental environment that sees health care as a natural part of its administrative monopoly? We answer with a qualified “yes.” Our paper, however, is not concerned with an appraisal of welfarism in its many guises nor with recommendations for reform, but with the pragmatics of operating within such an environment. As such we: (a) assess the philosophical presuppositions that animate recent discussion of the “Big Society” and the role philanthropy is accorded within it; and (b) offer practical guidance about protecting and encouraging the philanthropic impulse when a climate of welfarism prevails. Read More...

In her classic novel Death Comes for the Archbishop, Willa Cather provides a short but rich scene which helps crystallize the tensions underlying the relationship among charity, reciprocity, and the moral law (1990). The setting is the New Mexico territory in the middle of the 19^th century. Father Joseph arrives at a remote rancho riding his broken-down mare. He’s greeted by the patron, Manuel Lujon, who affords him all the hospitality due a stranger and, indeed, the hospitality due a priest visiting a faithful clan of believers. On the day before Father Joseph’s departure, after an evening of marriages and feasting, Manuel takes Father Joseph for a tour of his corral, where he displays his two prize, cream-colored mules, Contento and Angelico. Father Joseph swings up on Contento’s back and parades around, lamenting that his own lame mare will never see him through the miles to his final destination. Thoughtfully and, we are led to believe, somewhat reluctantly, Manuel offers the mule to the priest as a gift. “You have made my house right with Heaven,” he tells Father Joseph, “and you charge me very little. I will do something very nice for you; I will give you Contento for a present, and I hope to be particularly remembered in your prayers” (61). Read More...

A fundamental issue in contemporary philanthropic and nonprofit studies is the need for clarity, precision, and consensus on the meanings of two basic words and concepts we all use daily, and on which the validity of our scholarship and the productivity of our practice depend: “philanthropy” and “nonprofit.” Scholars and professionals customarily use these words interchangeably, as if they were synonyms. The IRS Master Data File on “nonprofits,” however, shows that not only are the two terms far from synonymous, but that outside the tax code (and state laws of incorporation, which relate to the tax code) they have nothing significant in common. Philanthropy is currently undergoing a classic paradigm-shift; this discovery should facilitate that process and help build the new, twenty-first century paradigm in philanthropy. Read More...