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dissent on taxation of nonprofits

July 20, 2005

Today, LibertyGuys criticizes the YMCA:

When a local YMCA decides to build a state-of-the-art fitness center in affluent communities instead of providing programs for underserved individuals and families, the organization is deserting the very elements of the entire community that it is legally bound to serve. When the federal government, in particular the Internal Revenue Service (IRS), does not impose unrelated business income tax (UBIT) on such YMCAs, it forces hardworking Americans to pay more than their fair share of taxes. These YMCAs are free to compete unfairly with for-profit fitness facilities, taking away customers and driving them into financial distress.

These charges don't stick. Firstly, YMCA's are not legally bound to "serve the entire community". Instead, they have goals related to the welfare and health of community members. When a board directors of a YMCA believes it will best serve those goals by building physical recreation facilities, then this is a proper use of donations and membership dues (disclosure: I have been a YMCA member continuously since 1994).

This past weekend, I took my kids to the YMCA pool, and my older girl to the YMCA rock-climbing wall while the younger one had fun playing with other kids in the childwatch. We saw friends and played together -- this serves the goals of healthy bodies, minds, and families. Secondly, regardless of what IRS rules are, when the IRS does not impose a particular tax, it is true that tax revenue is reduced for that year. However, it is not true that other people's taxes are increased for that year. Further, it is only very loosely true that this creates pressure for higher tax rates. As a "LibertyGuy", surely you realize that calls for "closing loopholes" is really a call for higher taxes, not a level playing field. I'm really sorry you are heavily taxed. Shouldn't we be calling for the elimination of those taxes, not the imposition of such a burden on all?

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