Differences in Costs Not-for-profit organizations’ costs also may differ. First, the not-for-profit may not have to pay taxes (especially property taxes), which tends to make the not-for-profit’s average costs lower. On the other hand, the not-for-profit firm’s greater agency problems may result in less efficiency and higher aver- age and marginal costs.
The fundamental problem is that we cannot predict how not-for-profit organizations will differ from for-profit firms. This lack of forecast is frustrat- ing for analysts and raises a question for policymakers: If we do not know how not-for-profit organizations benefit the community, why are they given tax breaks?
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