Lucy Berhnolz, in Blueprint 2013, writes:
The discussions about the tax code and charitable tax deductions should be our opportunity as a body politic and a civil society to re-align the regulatory domains of social good with the actual practice. Three independent studies done in 2010 and 2011 found changes in the tax rules would have minimal effects on giving. Simultaneously, entrepreneurs are rushing to create social purpose businesses. How do we want these two options to co-exist? Who does what best? What are the common goods – the civil society purposes – for which tax incentives and protection from markets is critical? Most of the discussion and hearings, however, will not involve everyday people. As do most discussions in Washington, DC, they will engage the professionals and the vested interests. For this reason and because there is no coalition representing an alternative point of view, I fear that the political battle will be fought narrowly over maintaining the tax deductibility of charitable gifts. There will not (yet) be serious discussion about the most effective ways to provide incentives for private involvement on behalf of public benefit....
I guess this means that the tax deduction for charitable gifts might go as well to incentivize social entprepreurs, who would themselves own the enterprise? And that social entprepreurs should maybe form a coalition to get tax breaks for themselves? Or, failing that, the social entrpreneurs' coaltion could repeal or reform the charitable deduction so as to expose some or all charities to the rigors of the market, so that creative destruction could run its course, to the betterment of society, as forprofit firms displace nonprofits in vending services effectively and efficiently? (Per Lester Salamon, a lot of that has already happened with foprofits now having dominant market share in, for example, home health care. Salamon attributes this, in part, to the greater access that forprofits have to capital markets, enabling them to scale up quickly in response to changing economic conditions, and changing government policies.)
Maybe, the best outcome, then, would be to have tax dollars kickstarting a social enterprise which would grow to scale, making the entrepreneur very rich? Maybe, the government, in that case, or we the people, should own a venture capital share in such schemes? Maybe we the people through an elected representative could take a Board seat?
Salamon is a necessary "read" in these debates. He says nonprofits are pulled among four forces, Commericialism, Civic Activism, Volunteerism, and Professionalism. The current emphasis on social ventures considers nonprofits as essentially vendors or providers of services. Some nonprofits like hospitals, schools, and homes for the aging are easier to conceptualize this way than are, say, the women's movement, or a neighborhood midnight basketball program, or a church. One reason we protect nonprofits from the rigors of the market is that they are Values Guardians. They are, as he puts it, the way we keep certain traditions alive (particularistic, rich traditions, like those rooted in race, gender, religion, and the arts). Since we as a nation cannot all agree on "values," we agree to disagree and we agree to surround the public square not only with shops, farms, and factories, but also with sacred places whose towers reach to heaven not as skyscrapers but as fingers pointing to what is higher - though we do not agree on what it might be, we agree that higher has meaning, and it should be protected as sacred, as of another order. We have family and have in certain nonprofits the seedbed of the heart, mind, and soul, where we are all valued and nurtured beyond price by those whose motives are often weighted towards love (of humanity, great books, religious tradition, of children, of those in need, of the poor in whose face they see their Maker's). Schools are not churches, but the Gothic tradition and the dreaming spires of Oxford, Yale, Harvard, University of Chicago, and so many schools remind us of the shared roots (the monks). Not all is for sale (yet), though the sale of Papal Indulgences under a Pirate turned Pope, funded by the Medicis, shows how far Social Enteprise can go, before it too needs to be reformed.
Salamon himself, by the way, has some pretty positive things to say about Social Enterprise and Impact Investing. (Youtube, from 2009, here.)