Citations (6)



The Pitfalls of Profits

Burton A. Weisbrod

Northwestern University - Department of Economics; University of California, San Diego (UCSD) - Department of Economics


Stanford Social Innovation Review, Vol. 2, Issue 3, p. 40, 2004

Since the 19th century, the Young Men's Christian Association (YMCA) has morphed into a health-and-fîtness Goliath. In 2001, this tax-exempt organization had revenues of $4.1 billion, making it the largest nonprofit, in terms of earned income, in the United States. Today, many of the more than 2,400 local Y's in the country boast basketball courts, swimming pools, jogging tracks, and well equipped weight rooms. These familiar neighborhood institutions are under heavy fire, however, for an increasing presence in upscale areas. Private health clubs have sued Y's for unfair competition, claiming that as a tax-exempt charity, the YMCA is able to undercut private operators' prices enough to siphon away a significant amount of profitable business. The Y's expansion into affluent neighborhoods raises the question of whether it has become overly commercialized and whether it deserves its tax-exempt status. The Y's expansion into new markets is just one example of how nonprofits are becoming increasingly commercialized. The social sector is witnessing a wave of commercialization among nonprofits. The trend is partially a response to a leveling off of government grants and contracts as well as the lack of growth in tax-deductible donations to charity- the traditional sources of funding for nonprofits. Mechanisms to encourage donations, by altering tax law, are readily available. Mechanisms to discourage commercial activity, however, are more challenging. Outright prohibition of any activity that generates "sales" would have vast and uncertain consequences, but the use of tax instruments to discourage all commercial activity - not merely unrelated business activity, which is already subject to taxation deserves exploration.

Open PDF in Browser Download This Paper

Date posted: May 24, 2011  

Suggested Citation

Weisbrod, Burton A., The Pitfalls of Profits (2004). Stanford Social Innovation Review, Vol. 2, Issue 3, p. 40, 2004. Available at SSRN: http://ssrn.com/abstract=1850719

Contact Information

Burton A. Weisbrod (Contact Author)
Northwestern University - Department of Economics ( email )
2003 Sheridan Road
Evanston, IL 60208
United States
847-467-1235 (Phone)
847-491-7001 (Fax)
University of California, San Diego (UCSD) - Department of Economics ( email )
9500 Gilman Drive
La Jolla, CA 92093-0508
United States
Feedback to SSRN

Paper statistics
Abstract Views: 1,750
Downloads: 467
Download Rank: 42,717
Citations:  6

© 2016 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollobot1 in 0.203 seconds