FairTax Overview
While churches rely on charitable donations, they are somewhat impervious to the tax motivation, as
charitable contributions are linked more to church attendance than to tax credits or incentives.
“Americans who regularly attend church services contribute 2.2% of their income, a much higher
average than non-church-goers who average 1.4%. And the churchgoers’ higher level of giving is not
confined to [their] own congregations but extends to all types of non-profits . . . Active civic
participation, and church attendance in particular, is more important to a healthy non-profit sector than
the presence of any tax credit or deduction.”80,81
Non-religious charities such as universities and museums, for example, rely little on donative
sources of giving.
The large non-profits (whose assets account for more than three-fourths of the total assets of tax exempt
charitable organizations) received only 7.8 percent of their income in 1998 from direct public
contributions. Revenues from program services and membership, on the other hand, made up 74.5
percent of total revenues.82,83
Additional points
Several more points should be mentioned.
·
A large source of income for universities, colleges, and other training institutions is tuition
payments. Under current law, tuition payments are not deductible, not creditable, and must be
paid with after-tax dollars, except for credits available to low income taxpayers. Under the
FairTax, all payments for tuition and training are considered investments in human capital and
not taxable. Therefore all payments for tuition and training are made from pre-tax earnings.
·
Voluntary services provided to non-profits today, under the income tax system, are discouraged
because out-of-pocket expenditures are not fully deductible. Under the FairTax, such
expenditures are paid from pre-tax earnings.
·
Those uncompensated services provided by a charity to that population for which the charity
was founded and by which it fulfills its mission do not generate a taxable, retail-delivery event
under the FairTax. (This stands in contrast to barter between commercial interests and
individuals or between individuals. Such barter does generate a taxable event.)
·
Charitable operations, of course, continue to be tax exempt, operating under a sales tax
exemption certificate as they do today with most states. The FairTax does not tax purchases
made by qualified nonprofits/charitable organizations.
80
Barry, John S., “Faith, Growth, and Charity,” Policy Review, March, 1997.
Rose Anne Devlin also found religious giving was not influenced by the fact that charitable donations were tax deductible.
See Devlin, Rose Anne, “Charitable Giving and Charitable Gambling: an Empirical Investigation,” National Tax Journal,
March, 2000.
82
Large non-profits are those L J