When Congress first created tax exemptions for nonprofit organizations in 1894, the goal was simple: Support charitable institutions serving the public good. Today, that well-intentioned policy has morphed into a sprawling system that shields roughly 15% of the U.S. economy, approximately $3.3 trillion in annual revenue, from taxation. As America grapples with mounting federal debt and annual deficits, it’s time to reform this antiquated system that distorts markets and shifts the tax burden onto other businesses and individuals.
Consider credit unions, which were originally granted tax-exempt status to serve people of modest means. Today, they manage more than $2 trillion in assets, and many operate virtually indistinguishable from commercial banks, even purchasing them outright. In the past decade, credit unions have bought nearly 100 banks, using their tax advantage to expand far…
