Stephanie Strom’s article from Sunday, “Charities Rise, Costing US Billions in Tax Breaks“, which cited some research I conducted with a couple of Stanford students this summer, has elicited some interesting commentary on the web.
Princeton’s Stan Katz, a long-standing commentator on philanthropy and the nonprofit sector, posted a reply on the Brainstorm blog of the Chronicle of Higher Education, titling the post “Must Charity Be Efficient?”
Stan’s take is that charities need not be efficient. They simply are expressions of an American sense of individual philanthropy. I posted a reply on the Brainstorm blog, which I re-post here.
Thanks to Stan for posting something about the article. I’d re-write the post title to ask if Stan think that charities should be held to any standard whatsoever. That’s the fundamental question, I think.
Over the past few years, I’ve explored in writing a variety of possible standards for assessing the justification of tax incentives for nonprofit orgs and their donors. One option is to fix on a redistributive standard: nonprofit orgs are worthy of tax-incentivized giving if they demonstrably provide for basic needs of citizens.
In the recent report Stan describes above, Anything Goes, my students and I tried to show how little attention is paid to anything about the worthiness of a 501c3 application. Forget about redistribution. As Stan writes, we have a totally inefficient sector with tens of thousands of new 501c3s created every year, duplication of efforts, ineffective service, etc.
Stan appears to reject distributive and efficiency concerns out of hand.
So I assume he thinks the only standard is a non-distribution constraint: no profits to shareholders. He has to insist on this, for without it, we have no way of marking the difference between a for-profit and a non-profit.
But is this all we really want from the nonprofit sector? And do we want uniform incentives for every kind of organization under the 501c3 umbrella? Identical tax benefits for donors to the Red Nose Institute and to the Salvation Army? If Stan wants to go there, then I’d love to read an argument in favor of it that goes beyond what he wrote above.