When Charity Aids Tax Shelters

Abstract

“Furthermore, one may ask why, if the Government does not like the tax consequences of such sales, the proper course is not to attack the exemption rather than to deny the existence of the ‘real sale’ or exchange.”

How to deal with societal vice is always an interesting question. The body politic must first achieve a level of maturity that allows it to formulate a consensus regarding precisely what constitutes “vice.” By its nature, vice is an activity to which some ascribe no harm and others view as inherently harmful. Achieving consensus is therefore no easy task, and then, recognizing that supply would not exist but for demand, and vice-versa, the body politic must determine whether enforcement resources are best directed towards consumers, towards producers, or equally towards both. Here, questions of fairness and efficiency arise. Is it fair, for example, to direct enforcement measures towards the producer when other socio-economic factors prevent the producer from satisfying its needs in a more legitimate manner? Does it make sense to bring enforcement measures solely against the consumer and not at all against the producer of vice? A war on consumers might be absurdly ineffective if the enforcement resources devoted thereto pale in comparison to the enforcement resources devoted to producers.