It's time to tax income producing non-profits
“Providence needs a tax revolt.” I first saw this statement on a sign on Smith Street years ago. It was erected on the property of a good businessman, who had spent almost two decades honorably serving the community of Smith Hill. Years later, he is gone, but the statement remains true. We need a revolt, and the revolt must start at the State House.
Non-profits hold approximately 42 percent of the taxable real estate within the City of Providence. Under current state law, Providence does not have the right to levy taxes on those properties. Even if a non-profit owner uses land in a manner that competes directly with “for profit” businesses, the non-profit cannot be taxed. State law forbids it.
This differential in tax treatment for the same activity causes two problems. First, it creates an unfair advantage over local businesses that pay taxes. This tends to drive business away over the long term. Second, as non-profits continue to buy up key areas of Providence, their non-profit status pulls money off of the tax rolls. This punishes local homeowners and small businesspersons, who must pay more than their fair share.
It’s time to change state law. Boston, which boasts a growing and dynamic local economy, gets 16 percent on average of what a for-profit would pay, including hospitals, universities and major cultural centers. Providence, according to information from the city, gets as little as four percent from certain major non-profit institutions.
While Providence has done a number of things to improve its financial picture in the past few years, it faces pension obligations that were a result of over promising and underfunding by past administrations. Providence also needs to upgrade and repair important public infrastructure that has been neglected for too long. We need to upgrade our schools. Times change and our economic and tax policies must evolve accordingly.
There are many ideas about what the first step should look like. Any tax on non-profits must be justified and fair. One idea is to tax based on how certain real estate is used. This is a logical extension of how taxes are commonly administered in municipalities, where commercial uses are often taxed differently than residential uses.
The economic health of Providence is critical to any sustained economic success in Rhode Island. A failed Providence would be a difficult burden for the state to carry. A healthy Providence, like Boston, can be a powerful economic engine. A healthy Providence can help carry the state. It is time to empower our cities and towns with this essential financial tool.
State Rep. Daniel P. McKiernan, a Democrat, represents District 7 in Providence.