Episode 951: Targeting a $2.8 Trillion “Nonprofit” Tax Shelter

Summary

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Podcast Summary: Newt’s World – Episode 951

"Targeting a $2.8 Trillion 'Nonprofit' Tax Shelter"

Date: March 6, 2026
Host: Newt Gingrich
Guest: Scott Hodge, Tax and Fiscal Policy Fellow at Arnold Ventures; President Emeritus, Tax Foundation

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Episode Overview

This episode dives into the complex world of nonprofit organizations in America, specifically the staggering $2.8 trillion in untaxed commercial revenue generated by large "nonprofit" entities such as hospitals, credit unions, universities, and various sports and arts organizations. Newt Gingrich hosts tax expert Scott Hodge to discuss how expanding the corporate tax base to include these large nonprofits could provide significant federal revenue without burdening working Americans or the broader economy. The conversation also explores the history of nonprofit exemptions, examples of questionable nonprofit status, and implications for college sports and tax reform.

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Key Discussion Points and Insights

1. The Federal Deficit Crisis and Interest Payments

• Current Budget Situation:

  • The government is spending $1.35 for every $1 collected (04:20).
  • Net interest on public debt now exceeds the defense budget; within 10 years, it is projected to match combined defense and domestic programs (04:20).
  • Scott Hodge: “We are really threatening the future of the fiscal health of the country and the government by this profligate spending.” (05:40)

• Personal Analogy:

  • Hodge compares the federal situation to a family in crisis due to excessive interest payments, calling for urgent austerity and revenue-raising measures (06:01).

2. Nonprofits as Untaxed Corporate Giants

• Nonprofit Revenue:

  • About $2.8 trillion in business income is made by large nonprofits—hospitals, credit unions, universities, leagues—yet goes untaxed (06:44).
  • Tax-exempt status has enabled some organizations to operate as large for-profit businesses while avoiding taxes (07:43).

• Impact on Competition:

  • Hodge argues this is “government favoritism” and undermines the free enterprise system, forcing for-profit businesses to indirectly subsidize their nonprofit competitors (07:43, 13:21).

• Notable Example:

  • Kaiser Permanente: $127 billion in revenue and $9 billion in net income (profit) in 2023; CEO compensation around $12 million, with all profits untaxed (08:17).

• Origins of the Loophole:

  • The nonprofit corporate exemption dates back to 1909, initially intended for small, mutual aid groups, not major enterprises (09:34, 10:16).
  • Historical legislative warnings that the exemption would be abused have proven prescient (10:16).

• “Double Non-Tax Income”:

  • Television networks (e.g., ABC) deduct payments to nonprofit organizations like the Academy of Motion Picture Arts and Sciences; the Academy, in turn, pays no tax on this income— so the revenue is untaxed by anyone (12:22).

Memorable Quote

“Hospitals that claim to be nonprofit, except, by the way, they make a huge amount of money. They pay the hospital administrator a terrific salary. Every year they get bigger.”
— Newt Gingrich (07:43)

3. Sports Leagues and Nonprofit Status:

• Sports Organizations:

  • The Academy of Motion Picture Arts and Sciences, PGA Tour, and U.S. Tennis Association all retain nonprofit status despite massive commercial revenues (12:09, 20:05).
  • NFL and MLB gave up their nonprofit status due to political pressure and embarrassment (20:31).

• Collegiate Sports:

  • Universities are creating business entities (LLCs) for athletic departments, negotiating multi-million-dollar TV deals, and partnering with private equity—operating as de facto professional leagues (22:56, 23:22).
  • New NIL (Name, Image, Likeness) rules further blur lines between amateur and professional sports (26:27).

Memorable Quote

“College sports...are clearly now almost like the AAA baseball feeder system. And baseball men, you go to college in order to increase your net value when you get drafted. It’s a totally different model.”
— Newt Gingrich (24:22)

4. Policy Solution: Taxing Nonprofit Business Income

• Proposed Reform:

  • Expanding the corporate tax base to tax the business income of large nonprofits at the standard corporate rate could generate about $51 billion annually (14:30).
  • Hodge asserts this approach is economically neutral, fair, and levels the competitive playing field (14:41).

• Political Obstacles:

  • Any legislative effort would face fierce opposition from powerful hospital associations, credit unions, and other stakeholders (18:38).
  • Previous partial rollbacks of nonprofit tax exemptions happened in 1951 and for some insurance and health sectors, showing it is politically possible (18:44).

5. Next Steps for Broader Tax Reform

• Need for Simpler, Flatter Tax Code:
  • Hodge advocates for a flat tax, referencing Estonia’s simple and competitive system (34:11).
  • Simplifying the code reduces corruption, special-interest lobbying, and increases predictability and transparency (34:11, 38:37).

Memorable Quote

“Taxes should be neutral…should be simple, easy to comply with, easy to administer…predictable…and there should be some transparency. And with those core principles, we set out to try to analyze current tax policy, but also provide guidance for lawmakers…”
— Scott Hodge (38:37)

6. The Tax Foundation’s Role

• Background:
  • Hodge describes his journey reviving the Tax Foundation, from a small struggling group to a global organization (37:43).
  • The Tax Foundation advocates for neutral, fair, and pro-growth tax policy—both domestically and internationally (38:26).

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Timestamps for Key Segments

• Federal Debt and ‘Autopilot’ Deficits: 04:01–05:47
• Explaining Nonprofit Tax Loopholes: 06:01–13:21
• Sports & Entertainment Organizations as Nonprofits: 20:05–23:22
• College Athletics Go Corporate: 22:44–26:15
• Private Equity in College Sports: 29:21–30:13
• Tax Reform & Flat Tax Discussion: 34:11–37:27
• Tax Foundation’s Mission: 37:27–40:04

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Notable Quotes

• On the Deficit:
  • “The government is now spending $1.35 for every $1 that it collects in tax revenues.” (Scott Hodge, 04:20)
• On Corporate-Scale Nonprofits:
  • “At best, it’s government favoritism. It’s a subsidy from the taxpayers to these large businesses. And from a free market perspective, it’s unconscionable…” (Scott Hodge, 06:44)
• On Career College Athletics:
  • “It is really professional sports masquerading as university activities.” (Scott Hodge, implied, 22:56)
• On Simpler Tax Systems:
  • “[Estonia’s tax system] is about as simple as you can get. It’s especially good on the corporate side…a 20% rate for corporations, 20% for individuals, 20% for capital gains…That would be an ideal tax system to me.” (Scott Hodge, 34:11)

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Memorable Moments

• The “Double Non-Tax Income” explained for Hollywood awards shows (12:22)
• Kaiser Permanente CEO’s massive salary versus ‘nonprofit’ status (08:17)
• NFL/MLB going for-profit out of embarrassment and politics (20:31)
• Rutgers and Utah universities establishing athletic LLCs for fundraising and athlete pay (23:22)
• Discussion of the perverse effects of NCAA coach buyouts and booster tax deductions (27:43)
• Brief tribute to Tax Foundation’s expansion to Brussels and international reach (37:43)

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Conclusion

This episode reveals how a century-old tax provision intended for small charities now enables vast commercial empires to avoid billions in taxes while competing directly with their taxed counterparts. Scott Hodge and Newt Gingrich make the case for taxing the business income of large nonprofits—arguing it would generate revenue to ease the deficit, improve fairness, and better reflect today’s economic reality. The discussion concludes with a call for broader tax code simplification in the mold of countries like Estonia.

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For listeners wanting more depth on fiscal policy, nonprofit tax law, and the shifting business of college sports, this episode is rich with historical context and contemporary proposals—delivered in a direct and insightful manner.

Transcript

[Scott Hodge]

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[Newt Gingrich]

My guest published a really thoughtful op ed in the Washington Post Entitled Targeting this $2.8 trillion tax shelter could solve a big US problem which addresses both our federal deficit and a big idea for a revenue source which we're going to ask him about. I am really pleased to welcome my guest, Scott Hodge. He is a tax and fiscal policy fellow at Arnold Ventures and President Emeritus of the Tax foundation, which has done terrific work over the years trying to understand where we are and where we should get to. Scott, welcome and thank you for joining me on Newts World.

[Scott Hodge]

Thank you very much.

[Newt Gingrich]

Let's start with the big picture. The latest numbers from the Congressional Budget Office show deficits topping $2 trillion for years to come with debt levels we've never seen outside of wartime. When you look at that trajectory, how worried should Americans be?

[Scott Hodge]

Extremely worried, Mr. Speaker. The bottom line is that the government is now spending $1.35 for every $1 that it collects in tax revenues. And as you mentioned, that is the trajectory for as far as the eye can see. And I think some of the more worrying elements of this is that so much of that spending is on autopilot through entitlement, whether it's Social Security or Medicare or Medicaid and other things. But at the same time, the debt load is increasing the interest payments on that debt. And I was looking at some of those Congressional Budget Office forecasts and it's truly frightening how much that interest payments are increasing over time. Currently, we are paying more in net interest on the debt than the size of our defense budget. But if we look Forward by about 10 years or so, we'll be spending as much on interest on the debt as both defense budget and our domestic programs combine. That's really scary. And what that means is that that interest because of the debt is crowding out spending opportunities for other more important elements of government. And so we are really threatening the future of the fiscal health of the country and the government by this profligate spending. And we've got to get it under control.

[Newt Gingrich]

Wouldn't you say if a family came to see you for advice and their share of their income going out just for interest was comparable to US Government, you would tell them they were in a crisis?

[Scott Hodge]

Absolutely, in a crisis. And it's the kind of crisis in which you cancel your cable subscription, your cel, scrimp in every way possible, and perhaps even go out and get a second job because your revenues and your spending are simply not matching. And I do think that we need to look at other opportunities to raise revenues in doing so in a way that doesn't harm the economy or put additional pressure on middle class and working families and entrepreneurs. And as I mentioned in this op ed in the Washington Post, one way to do that is to expand the corporate tax base to tax the business income of big nonprofit businesses, corporations that are essentially for profit but masquerading as nonprofit charities. And those are things like hospitals, credit unions, universities, big consulting firms, things like the ncaa, for instance, which is basically a sports and entertainment business. Now there's roughly $2.8 trillion worth of business income that's being made by these so called nonprofits. And it goes untaxed. And I think that that's unfair. It's at best government favoritism. It's a subsidy from the taxpayers to these large businesses. And from a free market perspective, it's unconscionable to have these big government subsidized businesses competing with for profit firms. And that just undermines, I think, our free enterprise system to its core.

[Newt Gingrich]

Your article is so breathtaking. The notion that nonprofits, I.e. companies, foundations, organizations that claim they're not making any money, actually generated $2.8 trillion in commercial revenue. You think about that for a second. You go, wait a second. And I've always felt this way, for example, with hospitals that claim to be nonprofit, except by the way, they make a huge amount of money. They pay the hospital administrator a terrific salary. Every year they get bigger.

[Scott Hodge]

What's interesting, I think, very surprising for a lot of Americans, is that there are more nonprofit hospitals than there are for profit hospitals. And it's really kind of an anachronism. It's an accident of history in so many respects, because these nonprofit hospitals started out as charity hospitals, and often many of them were religiously funded back at the turn of the last century. And they were allowed to grow and expand because of their charitable nature. But as things moved on and the economy grew, they were allowed to become big businesses. The biggest one of all is Kaiser Permanente, which had $127 billion worth of total revenues in 2023 and about $9 billion of net income, that is profits. And they pay no tax on those profits. And the CEO, I think, made somewhere around $12 million that year. There aren't a lot of baseball players who make $12 million a year. And here we have a non profit CEO making that much money. So it really kind of builds a lie around this whole notion of nonprofit. And I think that we ought to quit using that and just simply say taxpayer subsidized Inst.

[Newt Gingrich]

You make a point which I frankly did not know at all and was surprised by that. This actually goes all the way back to 1909, when they were developing the corporate income tax separate from the individual income tax that they actually deliberately put in a provision. But at the time, they thought they were protecting very small, weak collective organizations such as fraternal societies, helping widows and tending to the poor. You quote from Senator Cole Crawford of South Dakota in the 1909 debate, who warns, once you start letting them make profits as nonprofits, it's all going to grow.

[Scott Hodge]

Yeah, that was pretty precedent, wasn't it? You know, it's interesting that that whole debate over nonprofits, so much of it was really based on the norms of the late 1800s when we did have a lot of these social self help type organizations, whether they were savings and loans or credit unions, things like that, that started out as truly self help. And as you mentioned, some of these mutual aid societies that were meant to help widows, orphans and the poor, however those got ingrained, they kind of allowed this slippery slope in which they opened the door to big businesses. And as those senators and others warned at the time, guess what, folks, my fellow senators, in time, people are going to come to us and say, we too are a mutual help society or a mutual aid society or a credit union, and we ought to be exempt as well. And we saw the doors open. So just a few years after they created this tax exemption in 1909, by 1913, when they created the personal income tax, they expanded the window of or the opportunities for nonprofits. They did it again in 2016 and 18 and so on, and it began to expand. So then you had tax exempt electric companies and sewer companies and other big businesses that grew out of that entire experience. Credit unions today, for instance, have over $2 trillion worth of net assets. They're essentially commercial banks masquerading as nonprofits. And you know, in their time, they may have served a useful function for people who were unbanked, but that's no Longer the case. And so they ought to grow up and essentially graduate from this government subsidy they've enjoyed for over 90 years.

[Newt Gingrich]

Why does the Academy of Motion Picture Arts and sciences, who earned $147 million in 2023. Yeah. And they're a nonprofit.

[Scott Hodge]

Yeah, they're considered a business league or a membership organization in our Parlance. They're a 501C4. And so as a result, they're nonprofit, like an interest group, if you will. And so when they sell the rights to things like the Academy Awards or you get the other groups that have the Grammys, all of those are nonprofit organizations. And all of the TV revenues they get is tax free. What's interesting about this from a tax perspective is that it's what we in the business call double non tax income. And what that means is that when ABC pays the academy their $147 million, they get to deduct that as a business expense because that was part of their operating business. However, when the Academy gets that $147 million, it doesn't pay tax on it. So that money is completely out of the tax system and effectively subsidized by the rest of us.

[Newt Gingrich]

If I'm a for profit hospital, and I'm across the street from a not for profit hospital, I'm actually paying extra taxes in order to subsidize them. Not paying taxes while we're delivering the

[Scott Hodge]

same service and not only competing on a business to business basis, but effectively subsidizing your competitors. And so when I talk about the fact that this undermines our free enterprise system, that's really the heart of it. And we see it in so many different ways. Small businesses, small community banks, for instance, are being purchased by credit unions, which I kind of liken to your YMCA buying Gold's Gym. It just doesn't make any sense why a nonprofit would buy a for profit bank and then take it essentially out of the tax system. So here you had a profit making bank, one paying taxes both to the federal level, but also to your state and local communities. And now it's being purchased by a nonprofit and essentially being made nonprofit. And so the government loses, communities lose as a result. And I don't think that's fair.

[Newt Gingrich]

You suggest that if you simply applied the same corporate rate to the nonprofits, you would generate about $51 billion a year.

[Scott Hodge]

Yes. And that's the kind of new revenue that does not hurt the economy. It doesn't depress incomes. Like if you were to raise personal income taxes or raise the corporate tax on other businesses. It essentially expands the tax base in a way that is neutral, it's fair, it levels the playing field and it does so in I think in the most economically sensible way. It makes some of the biggest businesses in America pay their fair share while putting them on equal terms with their for profit competitors.

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[Newt Gingrich]

Somebody who introduces this bill is going to have an amazing number of groups against them.

[Scott Hodge]

Yeah, every hospital in their district is going to come out of the woodwork and lobby against it. Every credit union, you can only imagine. And they're going to want to keep those preferences that they have now. And it's going to take an awful lot of courage to change this. But Congress has done this before. I should mention in 1951 it eliminated the tax exemption for certain types of savings banks and home loan banks. In other times it's reduced the tax exemption for things like tiaa, CREF, and some of the Blue Cross Blue Shield. So there have been times in which Congress has pulled back those tax exemptions because they believe that those industries were unfairly competing with for profit firms. And it's just a matter of taking that on again. We've seen hearings every couple of decades. 2006, there were a series of hearings about the unfair competition between nonprofits and for profits. We saw it about a decade ago, as well as Senator Grassley and others held hearings about this. So it's always been on the mind of Congress. They've held lots of hearings, but they haven't always taken that next step to pull back this tax subsidy for these big businesses.

[Newt Gingrich]

One of the examples that I think is fascinating. You point out that the PGA Tour and the United States Tennis association are still nonprofits, but both the NFL and Major League Baseball gave up that status. Let me start with the folks who did. Why did football and baseball give up their nonprofit status?

[Scott Hodge]

In many respects it was simply embarrassment. Members of Congress had been calling on them. They used to be what were called 501 organizations. Those are business leagues, kind of like the Chamber of Commerce. And things like that. And members of Congress had railed against them because they, number one, they saw the billions of dollars that were flowing into those sports and entertainment businesses, but they also saw the kind of money that the executives were earning at the NFL and mlb. And so finally, I think both of those organizations realized that politically they had to change and become a real for profit business. And much of what they do anyway is channel billions of dollars worth of TV revenues and sponsorships to their teams who also pay tax on the income that they earn. And really that's what we see, unfortunately, with things like the golfers and tennis and even the drag racing, things like that are still hiding behind that business league, nonprofit. And it's time for them to own up and become the real sports entertainment businesses they are and pay taxes like everybody else. And one last note on that. It's interesting that pro basketball, the NBA was never a nonprofit. So it started out as a commercial operation and was never a nonprofit. I think that's kind of a fascinating story by itself, such thing that they made the decision.

[Newt Gingrich]

And be interesting to go back and look at the minutes of how they made that decision. When you look at this, why shouldn't both PGA and US Tenant association, why shouldn't they become for profit? I mean, they are for profit indeed.

[Scott Hodge]

And you know, we see tens of millions, if not hundreds of millions of dollars going into those businesses through sponsorships and Holstein tournaments and whatnot. And so they are effectively sports and entertainment businesses. And again, they may have started out as sort of a club or a league of sorts, but they really turned into businesses and not be treated that way.

[Newt Gingrich]

Given how we're watching the evolution of college sports, shouldn't that pretty soon also apply? Essentially like the SEC is a television negotiating system.

[Scott Hodge]

That's exactly right. They perform really the same function as the professional sports leagues like the NFL and MLB and that they negotiate these big TV contracts and then funnel those profits down to their members. And we're seeing a lot of these universities turn their athletic programs into professional sports programs. In fact, Rutgers was the most recent to announce that it was creating an LLC business and putting its entire athletic department in that new LLC so that it could raise more money, especially corporate money, to be able to pay the athletes, as is now allowed, and funnel some of that nil money to the athletes as well. And other universities have been doing this recently. The University University of Utah just signed a big, almost half billion dollar deal with a private equity firm to manage its sports program. And so the job of the firm is to raise more money through advertising and other things, endorsements for the athletic department. This is the wave of the future in college athletics. And no one's yet talking about. I mean it's sort of behind the surface, but it's quietly happening in front of us. And I think we just need to recognize that this is where the are going. And let's just say it's time for them to go pro.

[Newt Gingrich]

With all the various changes we've seen in the last three or four years, these are clearly now almost like the AAA baseball feeder system. And baseball men, you go to college in order to increase your net value when you get drafted. It's a totally different model.

[Scott Hodge]

It is. But the real challenge that everyone is wrestling with is, is what do you do about non revenue sports? We all know that football is the big money maker, basketball is the big money maker. But what do you do about gymnastics? What do you do about crew or rowing or archery and some of these other things that may have a competitive element, but they're not the kind of revenue generating activities that you see from the big ones. And then the other worry is about Title IX and how do you make sure that women's sports are equally funded as well as. So these are some of the more challenging questions that are being faced by these athletic directors. And members of Congress are dealing with this as well. There are a number of bills to try to organize some of this and try to bring some reason to the process. But there are some really nettlesome challenges that we're going to have to overcome the process.

[Newt Gingrich]

It seems to me you may end up in a system where all of the sort of secondary sports are paid for out of the activity fee of the university.

[Scott Hodge]

Maybe. I think it'll be interesting to see how this shakes out because so far, when say the University of Kentucky or even Utah put their athletic department into these LLC companies, they put the entire department in there. They didn't hive off football and basketball, they put the entire program there. So it will be interesting to see if they can subsidize all of it through these more lucrative deals that they're getting from both football and basketball.

[Newt Gingrich]

Well, and you also now have the income to the students. That's a story that's going to unfold over the next five or 10 years. We do not understand the path we're now on.

[Scott Hodge]

Yeah. And the interesting thing there is that the NCAA is seeking antitrust protection and they don't want to call these athletes employees. They want to essentially treat them as uber drivers. So they're contractors that we're paying, but they're not employees. And I think that that is probably going to lead us down a path where these athletes are going to unionize and we're going to see some measure of collective bargaining at the end of the day, much like we see in professional sports.

[Newt Gingrich]

What militates against that is you're only there for a short time. You come in and your real job is to maximize future revenue. So you have to think, if I get too active as a union member, does it get harder for me to get drafted?

[Scott Hodge]

Yeah, I never thought about that. That's an interesting one. I don't know how this is going to play out.

[Newt Gingrich]

We've entered down a trail, and I've always felt sympathetic because they're the reason people are there. They're the reason television's there. But for all these years, they were clearly the people who didn't get the money. I mean, it was a very strange system, largely driven, I think, by television and the sheer amount of money that you can now get out of TV contracts.

[Scott Hodge]

And the folks who did get the money are the coaches. And then we get these ridiculous buyouts that have embarrassed, I think, the entire system. Lane Kiffin and others are getting these enormous deals, but their predecessors, like Brian Kelly at LSU, gets a $54 million buyout, paid for by one donor, by the way. And so that's another obscene element of this, is that this guy gets a tax deduction for buying out the contract to this coach. It's just nuts. There was a recent report by the Knight Commission on Athletics finding that all of these buyouts from last year totaled well over $200 million. That's just obscene. And that's being done largely through tax deductible donations from boosters.

[Newt Gingrich]

But it's also a function that the sports have become that central to our culture. And they're really big businesses.

[Scott Hodge]

Yes, very much so.

[Newt Gingrich]

The former head coach, Alabama, had a rule that his contract said he would always be paid $1 more than whoever the highest paid coach in America was. And so he never negotiated for his own salary. He just hoped somebody out there was doing well and he would automatically go up whenever that was announced.

[Scott Hodge]

I want a deal like that.

[Newt Gingrich]

I'd have been happy on 10% of what he was making.

[Scott Hodge]

Exactly.

[Newt Gingrich]

But then I can't fill stadiums. And he could.

[Scott Hodge]

That's the other thing, right?

[Newt Gingrich]

Yeah, because it's real. I mean, sports at that level is really entertainment.

[Scott Hodge]

Yes, but up until this point, it's been an imbalance because it's all been with free labor and so the money has gone to gold plated facilities and coaching salaries and now they're having to try to figure out how do we fill out this third element of our budget and that's paying the athletes and that's bringing about a whole new challenge. And I think that's why we're seeing many of these programs begin to look at partnering with private equity firms to bring some cash to the table. But also what these private equity firms are bringing is understanding how to maximize revenues and expand their revenue base. And that's what these programs are leaning on the private equity to bring those technical abilities and business skills to a program in which has been run by amateurs up at this point

[Newt Gingrich]

Foreign.

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[Newt Gingrich]

I know you've been thinking deeply about this Scott. In addition to taxing the nonprofits that are actually profit making, what other steps would you take to help solve the deficit?

[Scott Hodge]

We really need fundamental tax reform. The last two tax bills were great in many respects. The 2017 tax bill lowered the corporate tax rate and made the United States much more competitive. That was fantastic. It simplified the tax code for individuals by increasing the standard deduction so that 9 out of 10Americans didn't have to itemize their taxes and their deductions. It did a lot I think to encourage new investment, especially capital investment because it improved the write off that companies could take for spending on capital improvements. The latest bill last year improved on many of those things. But it actually went backwards in some areas by adding on more complexity to the tax code, like no taxes on tips and overtime and things like that. So it actually made the tax code more complicated while improving it in many other ways. I think we need a great deal of simplification. If I could wave a magic wand, I would move to something like a flat tax, which we saw debated with great earnest about 20, 25 years ago, where people like Dick army and others were pushing for a flat tax. And that is getting rid of as many of these loopholes and deductions in the code as possible and lowering tax rates to a low, simple rate. Everybody pays the same rate with as minimal deductions and loopholes as possible. That would be an ideal tax system to me. There are tax systems around the world that we could emulate. Estonia has a wonderful tax system that's very simple. I think it's written on about 80 pages. And so it's about as simple as you can get. It's especially good on the corporate side because it's called a dividend paying deduction. So when companies give out dividends, that's when they pay taxes on it. But they can retain their earnings and reinvest in the business as long as they want. And then they only pay tax when they pay dividends to their shareholders. It's a 20% rate for corporations, a 20% rate for individuals, and a 20% rate on capital gains income. So you can see the synergy there that everything is at 20%. So you don't get the kind of arbitrage that you might get with more complicated systems. And what we find when we look globally, and this is really interesting, is that many of these Eastern and Central European countries that used to be communist have gone to these flat tax systems in large measure, not only to be more competitive and economically beneficial, but to remove the corruption that you get with highly complicated tax systems. And places like Georgia and Estonia and elsewhere have moved to these low flat tax systems. And it's really reduced the amount of corruption in their system because there's nothing to lobby on, there's nothing to trade favors about. And I think that that's the kind of thing that we need. And as you know about the lobbying in Washington and how big that that's become as an industry, we'd certainly benefit by eliminating that and going to a simple tax system that everyone can appreciate. And as Dick Armey said, a tax system I can respect and a tax system that respects me.

[Newt Gingrich]

And you had a substantial Impact at the Tax Foundation. Just share with us for a couple minutes what attracted you to the Tax Foundation. Why should people pay attention to it? And what would success be as seen by the Tax Foundation?

[Scott Hodge]

Well, my experience at the Tax foundation was an incredible part of my life, actually. I began my career here in Washington at the Heritage foundation and worked on the Contract with America as we were putting that together back in the 90s. But then I went to the Tax foundation in 2000 and at that point it was actually a kind of a sleepy little organization that was falling on hard times. I'd had six people in a million dollar budget and I started working with private philanthropies and individuals to build back the organization. And now it has close to 50 staff people and an $8 million budget. And we just opened an office in Brussels because we've gone global, the tax issues are now global, and the Tax foundation had to be part of that.

[Newt Gingrich]

So how does the Tax foundation define its relationship with tax policy? What is success as seen by the Tax Foundation?

[Scott Hodge]

Our philosophy is based on some core principles of tax policy. Taxes should be neutral. So we shouldn't use taxes to benefit some and punish others. It should simply level the playing field. Taxes should be simple, easy to comply with, easy to administer. Taxes should be predictable. You ought to be able to know what you're going to pay not only now, but 10 years from now, and have that level of stability. And then there should be some transparency. You should know why you're paying taxes and who you're paying taxes to and what's the purpose of the taxes that you're paying. And with those core principles, we set out to try to analyze current tax policy, but also provide guidance for lawmakers not just in Washington, but also at the state level and now at the international level to guide them toward pro growth, sensible tax policy that benefits both the economy, but more importantly taxpayers themselves, and to build the kind of economy that builds higher living standards and increases the well being of people. And so it's not just, you know, we're going to make a rich society, but we want to have tax policy that allows people to increase their standard of living over time and to build real wealth for themselves and their families and to foster innovation and entrepreneurship. And tax policy can do that if structured in the right way.

[Newt Gingrich]

That's great. That's really helpful. Listen, this has been fascinating. You and I have opened enough different cans of worms here that we could do a separate podcast on about six different items just based on the things you look at and work on. I really commend you for thinking creatively and I hope you'll spend some time on this whole college athlete thing because I think it's going to become a really very complicated mess in the not too distant future. But Scott, I really, really am grateful that you would spend this kind of time and share with us.

[Scott Hodge]

It's been a great pleasure. I appreciate it and thank you very much.

[Newt Gingrich]

Thank you to my guest Scott Hodge. Newts World is produced by Gingrich 360 and iHeartMedia. Our executive producer is Garnzi Sloan. Our researcher is Rachel Peterson. The artwork for the show was created by Steve Penley. Special thanks to the team at Gingrich360. If you've been enjoying Newts World, I hope you'll go to Apple Podcast and both rate us with five stars and give us a review view so others can learn what it's all about. Join me on [e-mail] I'm Newt Gingrich. This is Newts World.

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[Scott Hodge]

Because a great trip starts with peace

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[Scott Hodge]

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