The Effect of Tax Exemption on Nonprofit Employees

Do healthcare workers benefit from their employer’s nonprofit status? Paul F. Byrne at Washburn University explores this question in his new article, “Do Workers Profit from the Nonprofit Tax Exemption? The Impact of State Tax Exemption on the Nonprofit Wage Differential of hospital Workers,” in the most recent issue of Public Finance Review. Read the abstract:

Previous studies on the impact of nonprofit status on employee compensation view nonprofit status as yielding a fixed benefit attributable to the legal prohibition against distributing profits. However, nonprofit status also exempts firms from many federal, state, and local taxes resulting in the size of economic rents varying by the jurisdiction. This study examines how differences in the implied subsidy of state and local tax exemption impact the nonprofit wage differential in the hospfr coverpital industry. The study also takes advantage of the fact that a significant proportion of nonprofit hospitals are religiously affiliated to control for worker self-selection into the nonprofit sector. Results indicate that nonprofit hospital workers receive a wage premium; however, the wage premium decreases as state tax burden increases. This finding suggests that the nonprofit wage differential is not accentuated by a hospital’s tax-exempt status but is instead a byproduct of the nondistribution constraint.

Read the entire article, free for the next month, here and don’t forget to sign up for e-alerts to receive the latest from Public Finance Review

This entry was posted in Compensation and Benefits and tagged , , by Cynthia Nalevanko, Editor, Management INK. Bookmark the permalink.

About Cynthia Nalevanko, Editor, Management INK

Founded in 1965, SAGE is the world’s leading independent academic and professional publisher. Known for our commitment to quality and innovation, SAGE has helped inform and educate a global community of scholars, practitioners, researchers, and students across a broad range of subject areas. With over 900 employees globally from principal offices in Los Angeles, London, New Delhi, Singapore, and Washington DC, our publishing programme includes more than 560 journals and over 800 books, reference works and databases a year in business, humanities, social sciences, science, technology and medicine. Believing passionately that engaged scholarship lies at the heart of any healthy society and that education is intrinsically valuable, SAGE aims to be the world’s leading independent academic and professional publisher. This means playing a creative role in society by disseminating teaching and research on a global scale, the cornerstones of which are good, long-term relationships, a focus on our markets, and an ability to combine quality and innovation. Leading authors, editors and societies should feel that SAGE is their natural home: we believe in meeting the range of their needs, and in publishing the best of their work. We are a growing company, and our financial success comes from thinking creatively about our markets and actively responding to the needs of our customers.

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