Open Letter to Arnold

01.07.09 | 2 Comments

This is a letter that was transmitted to California Governor Arnold Schwarzenegger from me:

January 7, 2009

Dear Governor Schwarzenegger:

No doubt you’ve noticed that the State of California is about to go bankrupt; you’ve taken several very public stands attempting to coax the State Legislature to collaborate and compromise in finding a budget that will address the looming financial fiasco.

Yesterday brought news of your veto to just such legislation and that is disappointing. While you may not remember this clearly, it was just such a public fiasco which prompted the recall of your predecessor; paving the way for your ascension into the Governor’s office.

That being said, I write to you to offer a partial solution to the current financial crisis: Immediately and permanently revoke the tax exemption for non-profit organizations with income greater than $250,000 per year or declared assets in excess of $500,000. While such a proposal likely will be met with a visceral negative reaction; I urge you to read the rationale for this proposal before arbitrarily rejecting it.

Of the 107,620 registered “non-profit” organizations in California, 85% have income streams of less than $250,000 per year. Generally, “non-profit” organizations fitting into this segment meet the spirit and intent of having the tax exemption, there is some valid reason to raise funds from the community to do some action on behalf of the community. There are no lavish pay packages for executives, expensive trappings, or junkets.

For example, our local Parent’s and Teacher’s Organization, Friends of Farallone View is a member of the segment. Volunteer directors and officers raise over $150,000 each year to complement the staffing and curriculum in our local elementary school. In total, this 85% segment had reported income of $1.8B trailing 12 months through October, 2008.

The other 15% of “non-profit” organizations had reported income of over $120B in the same time period. The organizations in this segment are enterprises that are easily recognized, regardless of their mission statements, as businesses and large businesses at that. These enterprises spend the vast majority of this income on sustaining infrastructure to operate at scale instead of on their primary missions, unlike the true “non-profit” organizations in the lower echelon.

For instance, an organization like Benny Hinn Ministries pays for private jets, exorbitant salaries, and luxury hotels while hiding behind the tax exemption intended to shield real community organizations doing real community work. This organization harvests hundreds of millions of dollars with zero oversight or accountability. While Hinn Ministries has been singled out, there are countless other examples from across the large “non-profit” segment. Why should organizations like this and executives like Mr. Hinn get a free ride while legitimate businesses and individuals contribute for the greater public good?

Using the standard California business tax of 10%, revoking the tax exemption for “non-profit” organizations with income greater than $250,000 per year would generate another $12B per year in tax revenue for the State of California and such a move would have zero impact on existing tax payers and businesses in the state today.

In conclusion, we’re in a crisis. It’s clear you know this and it’s clear you care. The proposal to revoke the tax exempt status for “non-profits” presents a pragmatic and responsible way to help solve our present financial challenge and to help you avoid the fate your predecessor experienced. It is my hope that you seriously entertain this proposal and use it in the ongoing negotiations in Sacramento.


Michael Harding, Concerned Citizen

Data supplied by The Urban Institute, National Center for Charitable Statistics