nonprofits tax exempt property tax tax shift

Monopoly, the Land Bubble, and the Financial Crisis
land bubble financial crisis

Tactics to Fight the 1%

There are good reasons to tax charities and to tax land, some experts argue. We trim, blend, and append three 2012 posts from: (1) Dirt Diggers Digest, Mar 1, on nonprofits by P. Mattera; (2) Radio Times, an interview of Matthew Yglesias, Mar 12, by M. Moss-Cohain; and (3) Left Forum, Mar 12, on the land bubble with Dave Kelley (Economic Adviser to Dennis Kucinich) et al.

by Phil Mattera, by Marty Moss-Cohain, and by Left Forum

Tax Day is approaching, and we will soon hear a rising chorus of criticism of large corporations such as Verizon and General Electric that don’t pay taxes. Yet there is another group of big entities that also dodge taxes but receive a lot less scrutiny: major non-profit institutions such as universities and hospitals.

Strictly speaking, giant non-profits are not dodging taxes, since they are largely tax-exempt. But that’s precisely the problem. These rich and powerful institutions increasingly behave like for-profit corporations yet are given privileged status under the tax laws.

The latest battleground over non-profit tax exemption is Providence Rhode Island, where Mayor Angel Taveras has been trying to get local institutions such as Brown University to do more to help the struggling city. The Ivy League college has been making voluntary payments to the city, but Mayor Taveras wants Brown, which has an endowment of about $2.5 billion, to play a greater role. Brown’s facilities in Providence are reported to be worth more than $1 billion, which would mean $38 million in revenue for the city if university property were taxed at the commercial rate [left out is how much Brown would pay under land dues or a location-value tax]. The Ivy Leaguer is paying about one-tenth of that amount. The mayor’s effort has won support from students at Brown, who have recently held rallies calling on the university to pay more.

It probably comes as a surprise to many that Brown is paying anything at all to the city. Providence’s arrangement with Brown is part of a limited but growing trend among local governments to persuade big non-profits to make voluntary payments in lieu of property taxes, or PILOTs. These are cousins of the PILOT agreements that for-profit companies often negotiate with localities when they are receiving large property tax breaks but want to be sure (often for public relations purposes) they are contributing something.

A 2010 report by the Lincoln Institute of Land Policy found that localities in at least 18 states have negotiated PILOT deals with non-profits. This often occurs quietly, but in Boston, where more than 50% of the land is tax-exempt, numerous universities and hospitals with deep pockets have gotten into high-profile tug-of-wars.

Although the city’s program was said to be the largest in the country, it was generating modest amounts of revenue. In FY2008 the total was about $30 million, but half of that came from the Massachusetts Port Authority, which runs Logan Airport and the Port of Boston; the rest came from about two dozen healthcare and educational institutions.

Last year the city began sending letters to several dozen major non-profits asking them to pay 25% of what their tax bills would be if they had no exemption.

Boston inspired other Massachusetts cities such as Worcester, home of Clark University, to join the PILOT bandwagon. (Cambridge did not need inspiration; it has been collecting voluntary payments from Harvard, whose assets now exceed $40 billion, since 1929).

As much as non-profits may grumble about PILOTs, these payments are quite benign compared to the fate that has befallen some hospitals: the complete loss of their tax-exempt status. For years, healthcare activists have charged that many non-profit hospitals were not functioning as true charitable institutions and should thus not enjoy the privilege of tax exemption.

In 2004 officials in Illinois sent shock waves across the hospital industry by revoking the tax-exempt status of Provena Covenant Medical Center in Urbana. Six years later the state supreme court upheld that determination. In the intervening period, some other Illinois hospitals lost their exempt status and the question of whether non-profit hospitals were doing enough to deserve tax exemption became an issue at the federal level, thanks to relentless efforts by Iowa Sen. Chuck Grassley.

New York non-profit hospitals have been providing little in the way of charity care, even though on top of their tax exemption they are allowed to tack a 9 percent surcharge on their bills to pay for such care.

How long will it be before these non-profits decide to follow the lead of their counterparts in the for-profit world and begin seeking subsidies to offset those obligations?

To see the whole article, click here .

JJS: For taxists, the issue is that some big nonprofits have billions while some local governments are in debt. For me, that’s not the issue. For me, the issue is, the value of land is common wealth and all landowners (whether for profit or not) should be paying land dues.

If the nonprofit school, church, or hospital can’t afford to pay the value of the land it sits on, it should move to a cheaper location, so the city can use its land more efficiently.

Bigger picture, should we continue to live in a society where so many of its members need charity? Or should we eliminate poverty? I vote for the second option. And land value could play a huge role in eliminating poverty, as it plays a huge role in geonomic policy. That is:
(1) Get rid of subsidies, so providers of goods and services must compete fairly and big business (for profit or not) can no longer squeeze out small firms, who would create more opportunities for employment and investment.
(2) Get rid of most taxes, instantly increasing the spending power of wage earners.
(3) Recover the value of land and resources and monopolies like utilities and then people’s steward -- government -- will be rolling in revenue. And
(4) From surplus pubic revenue, pay residents a dividend.

Presto. No more poverty. No more crying need for charity. And no more excuses for exemptions from taxes, or, in a geonomy, from land dues.

Happily, a prominent blogger agrees with the public recovery of land value.

This interview is worth listening to for a number of reasons. Matthew Yglesias is an influential writer and blogger. His current book is on the shortage and high cost of rental housing. Ex-FanneMae employee Ed Dodson called in and asked a question about the role of land markets. Yglesias’ response and all his remarks were informative and insightful. To hear the whole interview, click here .

JJS: What Yglesias and Dodson talked about, some New Yorkers are trying to bring about.

March 17, Dr. Michael Hudson, noted economist and author, and Dave Kelley, economic adviser to Dennis Kucinich, will discuss toxic mortgages, ultra-leveraged derivatives, CDOs, SIVs, and Liar Loans -- ways in which the 1% siphons money from the 99%, with the help of legislators, regulators.

Tax policies now favor speculation over working. From this, and the banks’ ability to create money from nothing, a Land Bubble inevitably follows, as does a collapse.

To “save the system,” the FRB bailed out the financial institutions with, as one retired Fed official put it, “liquidity on steroids” – recently reportedly cumulatively totaling $29 Trillion!

Beneath all the alphabet soup for debts lies a critical failure of capitalism: the ability of rentiers to corral the values of natural resources and locations.

Redirecting those values to everyone would free up the Commons, decrease corruption, expand opportunities, reduce poverty, and give true productivity power back to the 99%! Learn how to create a sane and sustainable world.

Early Registration online March 16th through March 18th. 212-817-2003

To see the invitation, click here .

JJS: Sounds great. I’d love to be there then.


Editor Jeffery J. Smith runs the Forum on Geonomics and helped prepare a course for the UN on geonomics. To take the “Land Rights” course, click here .

Also see:

During this bottom, who catches a break?

Struggles for Rent in Congo and Maldives

Today's College Students Lacking in Empathy

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