March 24, 2010; Monthly Review | Who would have thought that the Marxist view of nonprofit property tax exemptions would support the state’s position? States are increasingly considering taxing nonprofits to fill budget gaps.
This issue of the Monthly Review takes aim at Harvard University, an easy bloated target. The author notes that Harvard’s $51,000 tuition plus the costs of housing, clothing, and books means that an undergraduate degree costs roughly a quarter of a million dollars. The problem according to the Monthly Review? “[L]aws covering Cambridge and Boston exempt Harvard’s lands and buildings from property taxes. Harvard thus evades paying those cities the many tens of millions of dollars in annual property taxes it would otherwise have to pay . . . In contrast, middle and lower income owners of land, homes and cars in those cities must pay property taxes on them. Indeed, they all pay more precisely because Harvard does not pay . . . Harvard obtains free government services for which the rest of us pay.”
The author mentioned Harvard’s willingness to make payments in lieu of taxes to its host cities as “long-overdue public relations work,” but he contends that “Harvard hypes the PILOT payments in the hope that the public does not know or understand just how puny they are.”
As Woods Bowman of DePaul University has long shown, property tax exemptions for nonprofits are much more complex than a simple zero-sum calculation of some taxpayers exempted and other taxpayers paying more. Payments in lieu of taxes are not going to go away, and Harvard will be negotiating PILOTs with its host communities for the foreseeable future. There are probably good arguments for Harvard to use some of its ginormous tax-exempt endowment (still the largest among universities, $25.7 billion, as of January of this year) to provide much more assistance to needy students and more community program.
But the author doesn’t quite see that making tax exempt institutions subject to property taxes affects institutions like Harvard but also smaller colleges, museums, human service providers, property-owning YMCAs and YWCA, and many more nonprofit institutions. Rather than having every locality generate ad hoc rates for taxing nonprofits, we might do better by fixing the dysfunctional means by which localities and states raise money.—Rick Cohen