Taxing Nonprofits Could Help Save Philly Schools

by Christopher Paslay

Philadelphia’s multi-billion dollar nonprofit sector must start paying its fair share. 

According to the Philadelphia Foundation’s Nonprofit Study 2010, there are over 3,500 nonprofits in Philadelphia.  In 2007 alone, they made more than $25 billion in revenue, which was 7.7 percent more than they made in 2000.  These nonprofits—which provide services that focus on the arts, the environment, animal rights, education, health, civil rights, housing, food, recreation, and the like—had nearly $47 billion in total assets in 2007.

Interestingly, these nonprofits pay no real estate tax, despite billions of dollars in assets.  For example, the Kimmel Center as of 2010 had $16,449,000 in liquid assets (cash, grants, contributions, etc.) and 267,645,000 in total assets (endowment funds, land, building and equipment, etc.), yet are exempt from paying $5 million in annual property taxes.

According to a 2007 article in the New York Times:

The Chronicle of Philanthropy surveyed 23 cities to try to determine which nonprofits that seek public support — excluding foundations, government and religious groups — receive property-tax exemptions. Such exemptions accounted for more than $1.5 billion a year, with more than half that amount forgiven in New York City and Boston. . . . In terms of value, the biggest exemptions after New York and Boston were in Los Angeles, Washington, Houston and Philadelphia. . . .

The Chronicle’s survey highlighted several well-known properties beyond hospitals that receive big property-tax breaks. These include the Getty Museum in Los Angeles, exempted from $18.4 million in property tax; the Chrysler Building in New York, owned by the Cooper Union for the Advancement of Science and Art college, an exemption worth $17.5 million; and in Philadelphia, the Kimmel Center for the Performing Arts, exempted from $5 million in annual property tax.

The Philadelphia School District is facing a $300 million budget deficit next school year.  District officials are asking everyone to make sacrifices to help close this hole, and have demanded that the Philadelphia Federation of Teachers make tens of millions of dollars in concessions via wage cuts.  Officials are also asking for an additional $120 million from the state, and $60 million from the city, some of which may come from new property taxes.

Mayor Nutter’s new real estate tax assessment—AVI (Actual Value Initiative)—has ruffled the feathers of some City Council members, however.  According to a February 28th article in the Philadelphia City Paper:

This morning, City Councilwoman Maria Quninones-Sanchez quietly and without speechifying, offered what may be a solution to one of the central problems created by the Actual Value Initiative, the city’s property-tax reform effort. The problem: An estimated $200 million of the tax burden is being shifted from large commercial properties to residential ones, while small businesses are also in many cases expecting to see their taxes skyrocket. Sanchez’s solution: Put some of that burden back onto the large commercial properties by way of the Use & Occupancy (U&O) tax, which is applied to commercial tenants, and let the city keep some of that money to use for tax relief for the rest of us.

What’s curious is that Sanchez didn’t mention the problem with Philadelphia’s 3,500 nonprofits—the fact that they bring in $25 billion in annual revenue and have nearly $47 billion in assets—but pay zilch in property tax, money that could help bail out Philadelphia’s struggling public schools.  Why should our city’s students go without counselors, nurses, sports, art, and music while mega nonprofits like the Kimmel Center are sitting on a quarter of a billion dollars in total assets and get a $5 million break in annual property taxes?

Fight for Philly, “a grassroots coalition of residents, community groups, neighborhood associations, faith organizations and labor groups,” feels mega nonprofits like the Kimmel Center should start pitching in and shouldering some of the load.  Earlier this month, they delivered tax petitions to City Council and Mayor Nutter asking for better school funding, demanding that “mega non-profits pay taxes on their profitable commercial property and contribute fair ‘good neighbor’ payments for city services from which they benefit.”

I agree with Fight for Philly—City nonprofits should no longer sit back and get a free ride.  City Councilwoman Maria Quninones-Sanchez’s new tax reform bill should also include Philadelphia’s 3,500 not-for-profits, which earn $25 billion in annual revenue.  Even a small real estate tax on these organizations could generate millions of badly needed dollars for Philadelphia’s struggling public schools.

Teaching our Students to Feel Guilty About Financial Success

by Christopher Paslay

The New York Times is seeking to publish college application essays that focus on corporate corruption, class warfare, and the guilt associated with financial success.    

The New York Times is the only newspaper I know of that runs a “business” column not about how to get ahead economically but about how to indoctrinate kids to feel guilty about being financially successful.  At least that’s the theme of Ron Lieber’s recent article, “An Invitation for High School Seniors to Write About Finances,” which calls for seniors to submit their college application essays that focus on finance to the New York Times for possible publication.

How do high school seniors write exemplary essays about “finances,” exactly?  One way is by concentrating their writing on corporate thugs like Bernie Madoff.  Lieber states in his article:

At Pitzer College, a student used the example of the Ponzi schemer Bernard L. Madoff to take a philosophical look at how much money people truly need to be happy.

This, according to Angel Pérez, vice president and dean of admission and financial aid at Pitzer, makes for an excellent college application essay. “I think there is this new consciousness,” Pérez said.  “It’s unlike anything I’ve ever seen.”

High school seniors can also write about “finances” by stepping into the class warfare fray by stigmatizing the richest 1 percent and demanding they pay more taxes (more than the 39.6 percent they pay now).  According to Lieber:

Aside from the Madoff essay, Mr. Perez has read other Pitzer applicant essays and had other conversations with applicants about money and the economy in recent years that have stuck with him.

“One student last year was very affected by the whole conversation about the 1 percent,” he said. “He sent us his proposal for the tax code. The committee thought that this is someone who is clearly thinking about this in a critical way, is informed about what is going on the world and has done some dissecting of the information, and that’s the kind of student we’re looking for.”

High school seniors can also share their thoughts on “finances” by putting down in words the guilt they feel over their parents’ financial success and affluence.  Lieber writes:

The more affluent [students], if they do understand it, struggle further when trying to put it into words. “When it becomes visible, it comes accompanied with a U-Haul full of guilt that they’re towing behind them,” [Harry Bauld] said. “Then, it forces them into various clichés.”

But it need not always. Mr. Perez said Pitzer was quick to admit a student who talked about her travels around the world on her father’s yacht, anchoring in various high-end ports. “It bothered her that her family was never willing to leave the comfort zone, to go to real places,” he said. “To me, that young woman was absolutely memorable, and it took a lot of courage for her to do that.”

Apparently, leaving the limited confines of the United States and gaining new cultural perspectives and worldviews by visiting other countries doesn’t mean much—these experiences aren’t authentic and these places aren’t “real.”  (I wonder what are considered “real” places to people of this mindset?  My guess is that “real” probably means urban—where poverty is romanticized and street culture is glorified, where the rich, who live in their own separate neighborhoods and send their children to separate schools, feel guilty and privileged and have a codependent, patronizing relationship with poor people, where everyone votes the same and thinks the same and attacks anyone who dares present a different point of view).

Outside of class warfare and guilt over financial success, the New York Times is also looking to publish various college application essays where students have “thought through how you measure the success of the services a nonprofit organization delivers.”  Speaking of nonprofits, U.S. organizations listed as “nonprofit” earn $670 billion annually, yet pay zero federal income taxes.

Nonprofits are listed as “exempt” under section 501(c) of the U.S. tax code, so they don’t pay squat in taxes.  One in 12 Americans work in the nonprofit sector (and some executives of nonprofits are super rich), but the organizations pay nothing to the federal government.  (Do you see the irony here?  Evil corporations pay a corporate tax rate of 35 percent, while the $670 billion-a-year entity known as the sacred “nonprofit” pays none.  Quick!  Someone call Occupy Wall Street!)

With the “exempt” tax status of liberal nonprofits in mind, I’m sure the NYT is looking for college application essays that really highlight “the success of the services a nonprofit organization delivers.”

As a high school English teacher, I’m thinking about taking the NYT up on its invitation for seniors to write about finances.  Although I only teach 10th graders, I can still begin indoctrinating them to revile the rich and all their financial success and achievement.  I mean, who in their right mind would want to be rich?  Make lots of money and contribute nearly 40 percent of it back to their fellow man via the U.S. government in federal income taxes?  Who in their right mind would want to have a good quality of life and live in relative comfort?  Better to rail against money and success, become a sheep and adopt a groupthink mentality; better to engage in class warfare and side with the “takers” over the “makers.”

This way, my students can take full advantage of the entitlement programs being set up for them by those compassionate tax-dodging nonprofits, and make good use of all those kind, caring, progressive folks down at the NYT, like financial guru and “Your Money” columnist Ron Lieber.