Last year, Providence Mayor David Cicilline '83 advocated for imposing a property tax on Rhode Island's private universities and levying a fee on these schools' out-of-state students. Now, politicians are once again setting their sights on the tax status of organizations that already make major contributions to the local community.
Legislators in the Rhode Island General Assembly are considering a proposal that would require nonprofit organizations to pay the state's sales tax, the Providence Journal reported March 25. Currently, nonprofits in Rhode Island are exempt from paying sales tax on their purchases. The plan would affect a wide range of groups and institutions, including hospitals and private universities like Brown.
Proponents of the tax argue that desperate times call for desperate measures, and both Steven Costantino, Chairman of the House Finance Committee, and Daniel DaPonte, Chairman of the Senate Finance Committee, told the Providence Journal that they are looking at the idea because of concerns about the state's budget deficit. The New York Times reported February 27 that similar proposals have been put forward in other states and localities.
We understand that Rhode Island is facing serious financial concerns, but we do not believe that it is appropriate to place another burden on nonprofits. Hospitals and charities provide essential and valued services to the community. These organizations often supplement the government's social safety net, so targeting them for a tax increase seems highly counterproductive.
Rhode Island's 7 percent sales tax would be hugely expensive for organizations that are struggling to cope with the recession. Further, large nonprofits like Brown and the state's hospitals are major employers. The tax will cause cost increases that may lead to layoffs — just as jobs would be threatened by raising taxes on businesses.
The sales-tax idea could appear in a supplemental budget that will be considered before July, the Providence Journal noted. We hope students and the administration will mobilize to ensure that the sales-tax plan meets the same fate as last year's proposed student tax.
Instead of coming up with small stopgap measures, state legislators should think big.
Rhode Island's tax structure ranks 44th in terms of business friendliness, according to a 2009 study issued by the non-partisan Tax Foundation. Unless there are serious reforms, the state's tax base will remain small for years to come. Moreover, the Pew Center on the States found that the state employees pension fund faces $4 billion in unfunded liabilities. State legislators should work to address these challenges — and do so without trying to extract additional tax revenue from Rhode Island's universities, hospitals and charities.
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