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Monday, December 27, 2010

WSJ: Cash-Strapped Cities Hit Tax-Exempt Nonprofits With Plethora of 'Fees'

Front-page story in today's Wall Street Journal, Strapped Cities Hit Nonprofits With Fees:

Facing budget gaps and an aversion to new debt and taxes, states and local governments are slapping residents with an array of new fees—and some are applying them to nonprofits.

That marks a sharp departure from long-standing tax exemptions mandated by state law or adopted on the theory that churches, schools and charitable organizations work alongside governments to provide services to the community.

The issue is on display in Houston, where some flood-prone roads are in such disrepair that signs warn drivers, "Turn around, don't drown." Houston's taxpayers in November narrowly voted to adopt a "drainage fee" to raise at least $125 million a year toward the cost of improving roads and storm-water systems. The city will charge fees to property owners, and it won't grant exceptions to churches, schools and charities. ...

A number of groups—including schools, businesses, churches and senior citizens—are demanding exemptions. "We'll defeat this," says David Welch, of the Houston Area Pastor's Council, who plans to lobby state legislators in January. "This is really a tax. It is the first time that churches would not be exempt from property taxes," he says. ...

Some cities are charging religious groups property taxes on buildings no longer used for worship. Other localities are soliciting voluntary contributions. Albany, N.Y., recently passed an ordinance asking schools, hospitals and other nonprofits to contribute to city services. In Minneapolis, residents recently began paying a street-light fee that also applies to nonprofits, which in some places pay fees for elevator safety and fire inspection.

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Comments

"which in some places pay fees for elevator safety and fire inspection."

They certainly should!

Posted by: Israel P. - Jerusalem | Dec 28, 2010 7:27:45 AM

Unfortunately, services have to be paid for.

A great many people are going to be learning that over the next few years.

Posted by: rosignol | Dec 28, 2010 7:39:13 AM

"Nonprofit" status has become a tax avoidance strategy. Nonprofits use the same services I do, they simply refuse to pay for them (usually, a behavior allowed by law)because they "do good work" or something. This is simply another hole in the tax code that needs closing.

Seems to me that the establishment clause can be equally interpreted to mean, "tax 'em all, equally". We need a level playing field- not a free one.

Posted by: anon | Dec 28, 2010 8:23:59 AM

Government has decided to penalize organizations contributing to the public welfare in order to subsidize an organization which generally does not: itself.
Why is this surprising? There are many proposals floating around to eliminate deductions for charitable donations.

Posted by: great unknown | Dec 28, 2010 8:54:34 AM

Fees for elevator and fire inspection? City management better not let that genie out of the bottle; citizens will demand breaking out all gov't services by fee and paying for only those services they want the government to provide. Quite a cage for Leviathan.

Posted by: Wyatt's Torch | Dec 28, 2010 9:14:28 AM

""Nonprofit" status has become a tax avoidance strategy. Nonprofits use the same services I do, they simply refuse to pay for them (usually, a behavior allowed by law)because they "do good work" or something. This is simply another hole in the tax code that needs closing.

Seems to me that the establishment clause can be equally interpreted to mean, "tax 'em all, equally". We need a level playing field- not a free one."

In Houston, this is simply a tax to make up for pension obligations to city employees. Fee goes to general revenue, I am betting. That's why they'll win the exemption in the leg.

Posted by: Don Mynack | Dec 28, 2010 9:59:24 AM

As more people and organizations are caught in the tax man's net, the more reform will be demanded. Non-profits of all stripes are first in line to call for taxes and fees on everyone else, in this case I don't think it is necessarily a bad thing that they also be subject to taxes that support a community that they proclaim to be an anchor in.

Secondly, it would be a great step forward if taxpayers demand that their municipalities be required provide an itemized account of where their tax money is spent. Budgets are famously vague on details, allocating money to very large buckets and only after extensive research can anyone see the actual expenditures on a project basis by compensation, materials, and G&A. Transparency and accountability don't end with public meetings, it must expose the bowels of government as if it were any other business supported by investors, in this case taxpayers.

Posted by: jeff | Dec 28, 2010 10:56:10 AM

The Houston water fee is (so we're told) going into a separate fund to do (unspecified) drainage projects on a rolling basis (without debt financing), which in a city of its size is a rather good idea. The overbroad imposition of additional property tax with no specified purpose, however, is not.

Also, I'm of the opinion that the "infrastructure" argument is way overblown. It'd take trillions of dollars (read: impossible) to fix the sort of flooding that has gotten recent attention, not a few measly billions.

Posted by: melee | Dec 28, 2010 12:07:51 PM

where some flood-prone roads are in such disrepair that signs warn drivers, "Turn around, don't drown."

What does this have to do with roads? This is a common sign in Texas warning that some road are subject to flash flooding. It has nothing to do with the condition of the roads, sheesh, Smart ass yankees,

Posted by: RetiredE9 | Dec 28, 2010 1:39:45 PM

IF the Houston water fee is going into a separate fund to do ongoing drainage projects in order to eliminate debt financing, then that is a good thing. Provided, of course, Houston has established a law saying so. Without (or in spite of) such a law, at any point in time in the future, the city may just take their legislative hammer and crack open this nice juicy piggy bank filled with cash.

Posted by: Georg Felis | Dec 28, 2010 2:24:43 PM

Sounds like these cities are taking a cue from banks....

Posted by: Blacque Jacques Shellacque | Dec 28, 2010 2:45:08 PM

I think the exemption of nonprofits from many taxes has greater validity in an era of smaller government. It would originate in an era of 10% government and the safety net is the concerted action of private individuals and, because of resources, limited to the most needy.

Once government reaches and exceeds 50% of an economy, it seems a polity has reach the producers-vs-recipiants deathmatch, the government having gone maliginant. Not only are the social services of nonprofits no longer essential, but the bigger question for the health of the polity is moving everyone possible to the producers side of the political spectrum.

The tyranny of the political commons is that everyone that isn't a taxpayer is, in some sense or manner, a government mendicant, and so has a predisposition to looting the political commons, even if for such little gain is no more than feeling a bit superior to the rest of us. So we assist nonprofits by bringing them into the tax system as far as possible.

Posted by: pashley1411 | Dec 28, 2010 3:30:44 PM

No exemptions. Doesn't Jesus tell the Xians to "Render therefore to Caesar the things that are Caesar's". No exemptions.

Posted by: Dandapani | Dec 28, 2010 5:20:56 PM

My suggestion to churches is that any levy of a tax is an open invitation to engage in partisan politics at the level at which they're being taxed including but not limited to endorsing or opposing from the pulpit politicians that either support or oppose the churches platform, making campaign contributions, giving parisioners guidance on how to vote. These were previously prohibited under the veil of separation of church and state and any taxes levied against churches constitutes a removal of that veil. If these taxes are levied and churches are still prohibited from engaging in such political activity, this constitutes taxation without representation and is unconstitutional.

Posted by: Calvin | Jan 1, 2011 3:02:12 PM