The Big Business of Non-Profits

Here’s a simple fact: When the legislature eliminates a tax loophole for a special interest it can lower taxes on everyone else.

Here’s one more fact: When the legislature tries to eliminate a loophole, the special interest hollers – and hollers loudly.

There’s not a great deal of difference, in the real world, between a multi-million dollar for-profit hospital and a multi-million dollar ‘not-for-profit’ hospital.

Carolinas HealthCare System is an example. It’s one of North Carolina’s largest hospitals. And it’s a ‘non-profit.’ But it operates very much like a for profit business. It pays its CEO $5 million a year – just like large for-profit businesses pay their executives. It has multiple executives who earn over $1 million a year. And it even has a fleet of corporate jets and airplanes.

Big ‘non-profit businesses’ like Carolinas HealthCare System actually have little in common with traditional charities like the YMCA, Boy Scouts or a local church. But under our tax code they are treated the same. For instance, just like traditional charities they do not pay sales taxes (a tax exemption that dates back to a much earlier time when a local hospital was just that – local).

Senate Bill 700 addresses the reality that major ‘non-profit hospitals’ are actually no different from multi-million dollar businesses and that, like other businesses, they should pay sales taxes.

Before I go any further I should make one other fact clear: As a former President of the Boy Scout Council, and chair of the YMCA and a Board of Deacons, I have seen what traditional charitable organizations mean to our communities. This bill doesn’t affect the typical local Boy Scouts or YMCA – in fact, no charity that purchases less than $1.4 million in goods will pay one penny in sales taxes. None.

Instead, the goal of Senate Bill 700 is to close a tax loophole that allows big ‘non-profit businesses’ to avoid paying sales taxes – and to use that revenue to cut taxes on everyone else by $225 million. That means we could increase the standard deduction for a married couple by $2,000, so they would pay no taxes on their first $17,000 (up from $15,000) of income.

The bottom line is simple: What makes more sense? To give multi-million dollar ‘non-profit corporations’ a tax break so they pay no sales taxes? Or to close the loophole and lower taxes on working families?

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