Yes, I meant the title the way it is written. You may remember our Patriots of the 18th Century using the battle cry of “No Taxation without Representation” against the British. Well, we have exactly the opposite happening today. We have a lot of VERY WEALTHY organizations who pay no taxes. At the same time, these organizations have Representatives and Senators who “represent” them very well – much to the rest of our detriment.
So who am I talking about? Three types of organizations – hospitals, universities/colleges and churches.
“But wait”, you might say. Those are all “non-profit” organizations. They don’t make profits, so there is nothing to tax. Interesting how that works. As is the case with so many phrases that come from a bureaucracy the phrase “non-profit” doesn’t mean what it sounds like:
“Non-Profit” does not equal “I don’t make profits”. It simply is a taxing declaration.
“Contrary to their name, nonprofit organizations can be and often are highly profitable,” notes a report from the Institute for Research on Poverty. “They are restricted not in how much income they can generate, but rather in how it is distributed. Profit cannot be paid out to owners or anyone else associated with the organization: it must be devoted to the tax-exempt purpose of the organization. It is the profit motive, therefore, not the profit itself, that is restricted.”
So, a University can pay its football coach $7 million a year (evidently that is the “tax-exempt” purpose of a college). They can provide the coach and the President of the University with a private jet to do all business travel as well as some personal travel. A hospital can keep buying new land, build new buildings, buy the latest equipment without regard to whether that best serves anyone (if one hospital in town has the latest XYZ machine to treat one type of disease, must the other hospital in town have one also?).
Any college or hospital can make as much money they want and not pay a cent of income tax. So these organizations can spend their profits basically however they wish and not be taxed.
It gets even better. University endowment funds – their investments – are tax free (interestingly, the dictionary defines an endowment as a “permanent fund or source of income”). What is the financial impact? For example, Yale has an endowment of approximately $24 billion. Its endowment has averaged a 11% return the last ten years. They have avoided taxes on over $2 billion of income per year. Yet Yale paid its investment advisers $486 million last year to manage its endowment. Lets just say they could pay that much in taxes. How much money is that? Enough to provide free tuition to 100,000 students to go to Sinclair, every year. Or every undergrad student at Ohio State would have their tuition reduced by $12,000 every year. Remember that these figures are simply funds paid out of the profits from Yale’s ENDOWMENT fund.
And to put the cherry on top, Universities (and hospitals) do not have to pay property tax. It is estimated by the Santa Clara County Assessor that Stanford University received tax exemptions on their property worth $8 billion. Generally all of us pay $100-$500 at least per $100,000 of property value. Wouldn’t it be nice to be able to avoid that? Every university, college and hospital does. Anyone notice how much property Kettering Health Network and Premiere Health are buying and building on around the Dayton Area? All untaxed.
Keep in mind, universities receive additional federal money in the form of Pell Grants, subsidized student loans and other benefits. So they don’t pay any taxes but they get benefits from the Government. Isn’t that the complaint against “welfare recipients”?
The whole idea of allowing hospitals and Universities to be tax exempt is that they are “charitable” organizations – helping the public. This is a vestige from the earliest days of the country, where colleges and hospitals needed to be created and the capital was not available in our new country. We have long passed that stage.
I won’t even get into it about churches. But keep in mind, ANYONE can “create” a church and gain tax exempt status simply. Even better, according to the IRS, “Congress has imposed special limitations, found in section 7611 of the Internal Revenue Code, on how and when the IRS may conduct civil tax inquiries and examinations of churches”. Isn’t that convenient (a nod of the head to The Church Lady)?
I wonder why our politicians don’t look into this more rigorously. Where are the Patriots of ’76 when we need them?