Government and Nonprofits

Abstract

Federal, state, and local governments are similar to nonprofits in that their labor inputs pay taxes, but they are otherwise tax exempt. Governments are involved in some activities special to them, for example, defense, police, and court systems, but many government activities overlap with those of nonprofits, for example, education, healthcare, research, and programs for the poor. Nonprofits sell some goods and services, for example, education, and health services, but many also get revenues from donations. Governments also sell some goods and services, but their major revenues are from taxes. Many citizens value government activities. Republicans like defense; democrats like social services. It is, however, puzzling that republicans and democrats alike typically go to great lengths to minimize their taxes. Donations to governments are rare. I offer an explanation.