The Case Against For-Profit Charity

Benjamin Leff

Abstract

This article argues that the so-called "agency theory" provides a coherent justification for limiting the charitable tax deduction to nonprofit providers of charity, denying it to "for-profit" providers. It does so by integrating a concern with the government's agency costs into the analysis of whether the non-distribution constraint increases efficiency when the government uses a tax deduction to subsidize the provision of charitable goods.