How the Tax Code Subsidizes Hate

Subcommittee on Oversight, How the Tax Code Subsidizes Hate, September 19, 2019 

As you well know, hate is subsidized by both types of non-profit entities, 501(c)(3) and 501(c)(4). While the First Amendment precludes content regulation, that does not prevent the Southern Poverty Law Center from suing them into obscurity. The problem is that the same characters simply pop-up on YouTube (sometimes literally), overnight. One solution is to change bankruptcy law to make obligations follow successor companies. This would also be helpful in labor and tort cases. While this is not possible now, the next congress is less than 16 months away. 

More importantly, we can and should stop all tax favoritism for hate or anything else by ending the deductibility of charitable contributions on the high income surtax. Any tax benefit under the Subtraction VAT for services from non-profit organizations to replace only governmental services would leave out all 501(c)(4) organizations and limit 501(c)(3) status to charities that actually replace governmental operations. Hate groups will never fulfill that function. Educational and social service agencies will still be required to obey Title VII of the Civil Rights Act, however that is adjudicated next month. 

Any non-profit organization who sells or purchases commercial items will pay the Invoice VAT, as commercial organizations must do. Non-profit organization employees will continue to pay the employee contribution to Old Age and Survivors Insurance, assuming it is not subsumed into our proposed Subtraction VAT (S-VAT). 

Non-profit organizations will pay the S-VAT because their employees will benefit from the programs funded by this levy or from offsets to it.  This means that the children of hate group employees will still get the expanded refundable Child Tax Credit and families will still get health and educational benefits. Such groups will not be eligible for investment in any personal retirement account without forgoing non-profit status. Of course, hate ESOPs would be harder to evade the Southern Poverty Law Center. The insurance portion normally attaching to ESOPs is a tough call, as coverage would be paid upon bankruptcy, usually because of management malfeasance. Any lawsuit that leads to such bankruptcy should put individuals who cash out ownership shares at risk, whether for an SPLC judgment or for selling Oxycontin.  

Attachment One - Tax Reform