Edited by Bruce A. Seaman and Dennis R. Young
David L. Sjoquist and Rayna Stoycheva Introduction The special tax treatment of nonprofits has been the subject of a substantial amount of writing. Empirical research on the effect of the tax treatment of contributions appears to far exceed the research on the analysis of the property tax exemption and the federal and state corporate income tax exemption. In this chapter we explore what we know and don’t know about the property tax exemption. In summary, we know very little. There is very little theoretical work and even less empirical analysis of hypotheses regarding the effects of the property tax exemption. In 1988, Weisbrod (1988, p. 122) wrote, ‘Only a little is known about the quantitative importance of the various [tax] subsidies that are provided to nonprofits.’ While he was referring to the effect of tax subsidies on the size of the nonprofit sector, the statement was true for a broader range of issues. Twenty years later it does not appear that we know much more than we did then. Much of what has been written about property tax exemptions focuses on the justification for the exemption. (See Chapter 20 in this volume for a discussion of the arguments for the exemption of nonprofits from corporate income taxes, the deduction of charitable donations from the personal income tax, and deduction of charitable gifts from the base of the estate tax.) Historically, nonprofit organizations have been exempt because they provided public services together with or in place of the government. Brody (2002)...
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