OPINION:
As a nation, we’ve collectively decided that certain types of organizations providing what are generally referred to as social goods should be subsidized and that income supporting their core missions should not be taxed.
However, that opens the door to mischief. As we’ve seen on the campuses of America’s elite colleges and universities, the spoon-feeding of liberal pablum to the eager young minds they are charged with molding into substantive thinkers is turning brains to mush.
Starting with economist Stephen Moore of Unleash Prosperity, the call has gone out to tax these institutions and the income from the multimillion-, even multibillion-, dollar endowments upon which they sit comfortably, insulated from market pressures.
They are “big businesses” and should be treated as such. Indeed, the House and Senate versions of the One Big Beautiful Bill Act impose such a tax. It’s a good start, perhaps, but what’s being debated doesn’t go far enough.
The problem isn’t that the Senate’s version of the One Big Beautiful Bill Act slashed the rate set by the House in its bill. That’s a troubling but minor issue compared with the problem of the other business empires calling themselves “nonprofits” that Congress has not touched. It’s time to start taxing them too, starting with the proliferation of “not-for-profit” hospital systems, which, if they were part of the real, taxable economy, would be a source of considerable revenue to the Treasury.
Real tax reform streamlines the tax code by broadening the base while cutting marginal rates. We’ve done a good job so far. Now we must find new sources of revenue among what is currently untaxed or, because of narrow interest credits and deductions, undertaxed.
The U.S. hospital system is the largest slice of a $5 trillion health care pie, delivering care that is diminishing in quality relative to our recent past and that of every other developed country. Annual health care spending has increased exponentially to approximately $32,000 for a typical family of four.
What do we get for that? Increasingly crowded hospitals that can’t afford to keep beds empty too long, more time spent waiting for care, fewer interactions with doctors — who spend less time with each patient because of the total number who must be seen each day — and, despite federal and state laws intended to address the problem, the continuing proliferation of surprise or phantom bills.
Research shows that American nonprofit and charitable hospitals routinely ignore federal transparency pricing statutes, charge the poor more for drugs they have purchased at cost and bury in general funds billions of dollars in federal grants given to benefit the needy. They routinely pay their CEOs and administrators salaries that would bring down the Securities and Exchange Commission on a public company.
These are the “social goods” the tax code underwrites, and it’s the Internal Revenue Service that makes it possible. Unlike the rest of us, who face jail time and fines for innocent mistakes on our tax returns, because of the exemptions they enjoy, these highly profitable “nonprofit” hospitals are spared the time-consuming and expensive requirement of accounting for every dollar.
The data to support these criticisms has been cataloged and quantified by the Lown Institute, a nonpartisan think tank interested in “bold ideas for a just and caring system for health.” It’s abundantly clear that “nonprofit” is now a misnomer when referring to hospitals. The fair share deficit — the disparity between what a hospital provides its community and what it receives from the American taxpayer — reached an all-time high of $25.7 billion in 2024. Yet fully 80% of “no-profit” hospitals claimed to be “in the red.”
It’s trite to say it, but enough is enough. Exempt from the requirements imposed by the tax code on the “for-profit” sector and indemnified by the government, these hospitals and hospital systems are the newest major players in the real estate speculation market.
Former Senate Finance Committee Chairman Russell Long described tax policy as “Don’t tax you, don’t tax me. Tax the man behind the tree.” The nonprofit sector of the economy and the wealthy individuals who contribute significantly to it have benefited from that approach for too long.
We must take tax reform seriously. Instead of raising taxes and choking off private sector expansion and job creation, as liberals want, or loading up the code with narrow interest deductions to subsidize politically favored activities, as advocates for national conservatism want, we must return to basics. As Steve Forbes, the magazine publisher and pundit who made the flat tax the centerpiece of his presidential bid, has said many times, “Fairer, flatter and simpler is always the way to go.”
We must think more creatively than ever before to find ways to lower marginal rates, reduce costs, streamline the system and find real savings. It’s the only way to generate the significant growth needed to get our fiscal house back in order. Taxing big education and big hospitals like the big businesses they are is a good place to start.
• An experienced journalist and commentator who has contributed to various media outlets and is a highly regarded political analyst, Peter Roff is a former UPI and U.S. News columnist who is now affiliated with several public policy organizations. You can reach him at RoffColumns@Gmail.com and follow him on social media @TheRoffDraft.
Please read our comment policy before commenting.