Sunday, April 10, 2016

New Haven: No Tax Haven

Nice buildings you have here. Would hate to see them
taxed.....too much. (Image from
Connecticut Senate Bill 414 proposes to remove the property-tax exemption on Yale University buildings. Yale objects:
A bill before the Connecticut General Assembly that would tax Yale’s academic buildings is unconstitutional, say Yale officials.

“Yale is urging the General Assembly to reject SB 414,” said Rich Jacob, associate vice president for federal and state relations. “Yale is also making clear that SB 414 violates the U.S. and the Connecticut Constitution, and Yale is prepared to defend its constitutional right of non-taxation.”
It's dubious that Yale and other non-profit non-religious institutions have a constitutional right not to be taxed. Their argument is weakest in the case of property taxes, where the connection between taxes and benefits is strong; property taxes fund the police, fire, emergency, etc. services that help to protect Yale's property and people. Yale has recognized the connection by voluntarily making annual payments of $8.5 million to the City of New Haven, plus another $4.5 million on commercial properties unrelated to the University's function. One Yale Law professor (!) writes: [bold added]
the burden of property tax exemption is generally felt at the level where the tax is levied, which commonly includes the local municipality where the exempt institution is located. This means that many small towns with large universities are starved for tax revenue. As a consequence, when proprietary institutions [blogger's note: an example is for-profit colleges] mature to the point where they begin to offer services comparable to those offered by nonprofit organizations, withdrawal of exemption from the nonprofits should start with the property tax exemption, not the corporate income tax exemption. This seems, in fact, to be the pattern developing with nonprofit hospitals.
In the 18th century Yale envisioned itself as a place “wherein Youth may be instructed in the Arts and Sciences (and) through the blessing of Almighty God may be fitted for Publick employment both in Church and Civil State.” In contemporary Yale Almighty God has retreated to the Divinity School, Battell Chapel, and a few other buildings. The constitutional principle of church-state separation dictates that those structures should be Yale's tax havens, and little else.

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