Goodman’s Law: If You Tax Something You Will Get Less of It
From 2001 to 2011, the number of nonprofits in the United States grew 25 percent while the number of for-profit businesses rose by half of 1 percent, according to the most recent figures compiled by the Urban Institute.
There are still considerably more businesses than nonprofits, of course, about four times as many. But over that period, nonprofits also outpaced businesses in their percentage growth in hiring, wages and contribution to the gross domestic product, according to the Urban Institute. (NYT)
Non-profits expanding can only be good for economic growth. The larger they become in addition to more non-profit companies that are created, should help employment growth.
“But over that period, nonprofits also outpaced businesses in their percentage growth in hiring, wages and contribution to the gross domestic product.”
The non-profit sector is a great option for employment, especially in the growth that they are experiencing.
Especially for those research and education institutes. What they study may transfer to the profits in the future.
We actually complain the nonprofits demonstrate higher growth rate. These institutes are funded by both public and private organizations which can undertake such expenses. They may or may not create significant profits but they are a form of public demand.
“One reason is that as the population ages, greater demand for health care services drives growth in hospitals and health care organizations.”
Makes sense as health care jobs increase and most health care employers are non-profits, such as hospitals.
I am not convinced that this increase in non-profit organizations is due solely to the fact that these institutions are corporate tax except. There are several factors that make this happen. The first is the high unemployment rate forced people out of the traditional workforce and enter an alternative sector. Also most of these companies are not capable of outsourcing, thus they have to hire locally in order to fulfill their goals. During the recession these companies survived because the bottom line number is not as important for them as are for other companies. If a non-profit lost one million dollars during this time, it would simply decrease the scope of their operations. If a company lost the same amount, the effects would be greater. Tax might be an incentive for these companies to out-grow normal businesses, but I don’t think it is the main reason.
I agree. If the sole reason for non-profits to outgrow businesses is their tax exemption status, then most companies would be non-profits. Their status is not the cause.
Supply and demand are.
It is easy to receive a student loan these days, facilitating the access of individuals to upper education. The increase in students has allowed non-profit educational institutions to expand accordingly. If more students pay for tuition (which doesn’t change regardless of loan or lack of it) gives more funds to the universities, which are later translated into growth and improvement.
In other words, most of the increasing growth can be attributed to student loan debt and health care spending.
Does this suggest that if we decrease the tax rate for corporations, the economy will grow substantially? But aren’t there arguments and evidence that trickle-down economics is not as effective as it may seem.
Keep the tax rate at extent to which the profits are maximized. Please refer to Laffer Curve.
The Laffer Curve says that there is a tax rate for which tax revenue is maximized. The problem is that there is no way for us to know what point we are in the curve. How can you be sure that decreasing the tax rate won’t decrease revenue? Perhaps we are not maximizing revenue because tax rate is too low. I don’t see the point you are trying to make, maximizing revenue or not, regressive tax structures are harmful for the economy.
If you pay your CEO $1000000 are you really a non-profit?
Many of these entities are businesses in all ways except tax classification.
It is all about being competitive. You cannot expect to have a top of the line CEO and pay that person a salary that doesn’t cover for the expertise. Even being a non-profit, it has to have employees who are capable of being competitive.