Mr. LePage, a Republican, has called nonprofits “takers, not givers,” and argues that they need to contribute for services like the police, firefighters and snow removal. His proposal, which is part of his $6.3 billion budget plan, would require organizations to pay taxes to municipalities if their properties were worth more than $500,000. They would pay taxes only on the property value over that threshold and get a 50 percent discount on the rate.
http://www.nytimes.com/2015/03/08/us/nonprofits-protest-a-tax-on-property.html?_r=0
When I came across this article last week, I had a mixed reaction. Non-profits in the United States have historically been excluded from the tax rolls, for a variety of reasons. Chief among them, I think, was the belief that an organization doing non-profit work was fundamentally for the public good, and therefore, they paid their "community dues" as it were with their work, rather than their taxes. In the past several years, that mindset has shifted (or begun to shift) dramatically. Instead of viewing non-profits as inherently good for the community, the tendency is to see them as "takers, not givers". Inasmuch as I'd generally disagree with that assessment, I'd also suggest that there are plenty of good reasons to assume that some non-profits are in the business of being out for their own good rather than the good of the public at large. Extremely high salaries for executives (or in some cases, Pastors), a wide range of what constitutes a "non-profit", and so on. Inevitably this has led to calls for change in terms of how non-profits are handled in terms of their taxes.
This is not a new issue, either. I've come across it in a variety of ways in the past ten years, starting when I was in Seminary. At the time, the town in which the Seminary I attended was located held hearings or a public forum regarding the Seminary's contribution to the public services like education, police, and fire safety. The particular issue in that case (if memory serves me correctly) was that there were dormitories on the campus that were often filled with families, and those families sent their kids through the public school system, but neither the Seminary nor the parents of the families paid anything in property taxes to support their use of the services. The Seminary wrote an open letter to the community describing several different ways in which they voluntarily contributed to the public fund as well as the general community through voluntary payments towards the police and fire department, as well as encouraging a significant number of teachers aids and volunteerism in the school. The argument that the Seminary was trying to make was that they contributed in other ways to the community, so that overall, in their view, they were pulling more than their weight.
Another way this has come up is in relation to how the tax code treats clergy-owned or church-owned housing units. Without going into much detail, a clergy person essentially receives a double benefit when they own a home. Any money that a clergy person receives that goes to their housing is not taxable for Federal Income purposes. (A common misconception is that this is therefore totally untaxed, which is untrue. This "housing allowance" is still subject to the Self-Employment tax of 15%, which includes social security and medicaid. Although there is a tax loophole that allows clergy to opt out of Social Security, in my experience, most do not take that option.) Nevertheless, the "housing allowance" is not subject to FICA, which is the first benefit. The second benefit is that, just like every other tax-payer, the clergy person can deduct the tax and interest that they paid on their mortgage. Again, historically clergy-persons were considered "good for the community" but as time has progressed, that view has changed. (I'd also suggest that the church has probably too quickly expanded the definition of "clergy", which has led to more regular church employees receiving those tax breaks.)
The third way I'll mention that this property-tax conversation comes up is in relation to church-owned buildings. Our church is currently in the process of moving into a leased commercial space, and as we were planning I had an off-the-record conversation with a town official in which he told me that, as long as we were leasing it, we wouldn't have a problem. If we were to purchase it, however, the process might be dragged out. The reason? If we purchased it as a non-profit, it would be taken off the tax rolls, and the town wasn't willing to give up that extra income. Our story isn't unique, either. I've probably heard from at least ten different churches who all expressed a similar story: they wanted to purchase something, but the town wouldn't allow them to, because it would mean a loss in tax revenue.
My mixed feelings on this particular article come down to several factors.
First, I really have no idea how much revenue would be raised by this proposal. At what point does the revenue earned offset what will certainly be a net-loss for the non-profit community? The proposal in Maine doesn't tax all non-profits, just those who own property valued at over 500,000, and then only half of the normal rate at any valuation over that half-a-million mark. How many non-profits will be included in that? And what kind of non-profits? My guess is that most or at least many churches have a property value of 500,000 and higher. Educational institutions certainly would be included. There was a food pantry mentioned in the article, although I'd imagine that must be an outlier. So then I wonder, is it really just that we want to tax churches and educational institutions?
Second, as I mentioned, there is a part of me that understands the perception that the non-profit or church world is all about their own gain. Unfortunately, the non-profit/church world includes people who are going to abuse the system. My hope and experience is that those who would do that are a very small minority, but they do exist, and in the socially connected world, those minorities often end up being the loudest. The fringe ends up defining the rest of us. While I understand that dynamic, I don't think it defines the community as a whole and so I don't think that non-profits being "takers, not givers" is ultimately true, and therefore is not a good reason to justify a property tax. There might be a reason. It's just not that.
Third, there is also a part of me that feels like there are certain cases where the church would have more credibility in the public square if they were financially invested into it. One of the reasons that I prefer to purchase my own home, rather than live in a church-owned parsonage, is because then I pay property taxes just like my neighbor. That gives me a voice in the community that would otherwise be disingenuous, like when I'm at a barbecue with my neighbor and we're all complaining about how high our taxes are. I can only commiserate in theory, unless I'm on the hook for the same bill he is.
The bottom line is that this isn't a cut and dried issue, as most people probably assume. We need to think through the issues. Are non-profits good for the community? If so, does that mean they should be exempt from property taxes? I don't know if I agree with the Maine proposal, but I'm certainly not afraid of the discussion.