The recent New York Times news article, “Tax Exemptions of Charities Face New Challenges,” discusses the alarming trend of how nonprofits are perceived by government and society.

Few will argue that Massachusetts imposing a 2.5% annual fee on Harvard University’s $35 billion endowment is unreasonable, but where do we draw the line?

Rather than raise voters’ taxes, government officials are hastily seeking less politically suicidal “revenue enhancements.” While government needs a workable financial model, it should not forget its dependence on the nonprofit sector.

When government reduces its services, nonprofits step-in to fill the gap, and in many cases, offer higher quality services at a lower cost. Government contracts with these nonprofits – off-loading responsibilities to organizations that cover the difference between their costs and the government’s payment rate through a combination of fees, donations, and below-market salaries.

Government’s short-sighted trend of taxing the nonprofit sector’s narrow margins will have a crippling effect and many nonprofits may not survive. This will hurt the communities they serve and will result in fewer nonprofits for government to rely on over time.

Tags: nonprofit

This entry was posted on Tuesday, June 3rd, 2008 at 2:28 pm and is filed under Assorted Musings, Nonprofit Sector, Trends. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.