That Time NYU Almost Took Over The Macaroni Industry: Why Feeders are Not Tax Exempt
In Manchester this week the big news is the grand opening of a huge new “charity shop,” by which is meant a retail establishment that sells pretty much whatever you can buy in TJ Maxx or Overstock.com and then uses the revenues to support a charitable purpose. Its all perfectly tax exempt too. In the UK, most charity shops are like Dollar Stores, but quite a few others are like Macy’s. All are what we in the states refer to disdainfully as “feeders.”
Ever since the 50’s – around the time NYU got hold of a macaroni factory and damn near took over the entire pasta industry — Section 502 has ensured that the Newman’s Owns on this side of the pond enjoy no tax exemption quarter. Lest those feeder organizations run Kraft’s salad dressing operation out of business the way NYU nearly cornered the whole pasta industry.
Anyway, the newest UK charity shop is called Regenerage and it opened yesterday to lines clear around the block. Just like a brand new Overstock.com or TJ Maxx, except Regenerage sells used as well as new stuff; “designer goods from brands like Vivienne Westwood and Armani will be on sale, alongside furniture, books and children’s clothes.” The new store is two or three floors high and 11,000 square feet. Its appearance must rival the big box stores on Chicago’s Magnificent Mile. From the Manchester Evening News:
Hundreds of people have queued up to the first in line to grab bargains at a brand new charity superstore in Bolton. The Regenerage charity shop at Middlebrook Retail Park saw customers line up before doors opened for the first time at 10am this morning (March 20). The superstore, spanning almost 11,000 square feet, will sell designer clothes, bridalwear and furniture. Housed in the former Laura Ashley unit, the Horwich store will also sell a wide range of homeware, books, children’s clothes and new white goods, including washing machines and dishwashers.
Previously known as Age Concern Lancashire, the Regenerage charity helps support older people in Lancashire to live well and age well. Since launching in 1981, the charity has spent more than £42m on activities supporting older people in the area. The charity runs separately from Age UK, which is the merger between Age Concern and Help the Aged. To celebrate the launch, the charity shop was giving out free tote bags to the first 100 customers whilst anyone who purchases an item on the first day will be entered into a prize draw to win a £50 voucher to spend in-store.
Yeah, well don’t try that stuff over here. We would tax that thang right out of existence even if all the revenues go to help old folks. It’s not even enough to sell only used goods in proper thrift stores over here. Not if you want tax exemption. You better be doing some job training, or using volunteers to sell only used stuff below cost. And even then, its a crap shoot. As it should be because these thrift stores might run the Dollar Tree out of business. Just like NYU nearly shut down the for-profit macaroni industry in this country.
In the UK, Regenerage’s financial statements are available online and state without the slightest bit pretense or disguise, “the charity is exempt from taxation on its activities because all its income is applied for charitable purposes.” It’s the old “destination of income” test that prevailed before NYU undertook its predatory plan to corner the market.
You don’t have to be Rose-Ackerman or Hansmann to be highly skeptical that NYU’s charitable hegemony would have succeeded had UBIT not been enacted. Without actually saying so, they dismiss the unfair competition claim as plain old junk science. I sometimes think all of economic theory is junk science, but the idea that people will rush to establish charity shops and turn the whole world socialist seems to have been proven especially far fetched in the UK. So why does the UBIT persist? It certainly doesn’t bring in much revenue, its easily “zeroed out,” and the experts are pretty sure the Overstocks and TJ Maxxes would continue just fine if the UBIT was repealed. And on top of that, nobody in the UK ever even had a problem with feeders. There is even a whole Charity Retail Association in the UK that has trade shows just like U.S. associations serving for-profit retailers. They give out awards every year. Meanwhile, we are killing a whole lot of brain cells trying to figure out unrelated debt financed income and stuff like that. All the while giving new meaning to “no good deed goes unpunished.”
darryll k. jones