Taxing Political Committees

WM Oversight: Growth of the Tax-Exempt Sector and the Impact on the American Political Landscape, December 13, 2023

Finance, Taxation and IRS Oversight: Laws and Enforcement Governing the Political Activities of Tax Exempt Entities, May 4, 2022

There are two questions for the taxation of charitable contributions. The first is where the money comes from. The second is how the outgo should be taxed.

Under our proposed asset value added tax, assets would be marked to market at initial public offering, option exercise and the first sale after inheritance, gift and donation. When assets are donated to charities and nonprofits, no tax will be paid. When these institutions sell these assets, taxes will be collected in full. Whether endowment income is taxed is an open question, although usually the asset value added tax would be levied.  

Sales to employee-owned or cooperative firms will be zero rated, just as they are when a single owner sells out to an ESOP when transitioning out. We propose expanding this privilege to all asset sales. Note that as long as a business or family farm is kept in the family or sold to a cooperative, no tax is levied.

Political organizations and committees would also pay S-VAT (or I-VAT) on their payroll and their purchases would not be I-VAT exempt in the long term. These collections would be administered by state governments. 

Committees that give little to candidates should not be tax exempt, as they are essentially corporations whose high salaries are essentially partnership income in disguise, without the corresponding risk. As such, they should pay the asset value added tax on such distributions.

Asset VAT collections would be to the Securities and Exchange Commission for liquid assets and states and localities for real property. States and localities would keep these proceeds.

See the second attachment for more information on how taxes are administered under these proposals.

Attachment: Tax Reform (with videos)

Attachment: Tax Administration Video