Non-Profits Can Help the District’s Failing Economy

Public charities — organizations that do everything from advocating for wildlife to supporting stronger national defense — are the heart of Washington, D.C.’s private economy. Because it is the home of the federal government, the District has more non-profit jobs than any city of similar size. If the District wants a healthier economy, it has to do more to treat them like the economic drivers they are. The District has 8,200 non-profits and they account for a third of the overall economy (more than retail, restaurants, and law firms combined), provide over 100,000 jobs, and bring in $25 billion in government revenue.

If D.C. wants to reduce poverty, cut its near-10-percent unemployment rate, and get out of the recession ahead of the rest of the country, it should focus on improving things for the area where it’s already strong. According to the D.C. Fiscal Policy Institute, 130 non-profits got a little less than $25 million in earmarked grants. This is a waste. Plenty of legitimate government functions might well be accomplished by non-profits but the practice of propping up a few favored ones leaves a lot to be desired. When the District funds non-profits, it should make them compete.

Instead of sending them money, D.C. should revise its registration process. (D.C., like all states, requires registration for charities.) Registering in Virginia requires two steps and one form. Maryland requires the same. D.C. requires nine steps and 6 forms. In both Maryland and Virginia, all the forms are located on one user-friendly webpage. In D.C., an applicant is directed to fill out the multiple forms on different websites. For one form, the registrant has to physically go to the Department of Consumer and Regulatory Affairs. The District government should also look at ways of reducing non-profit businesses costs. Most organizations don’t want "high-image" plush office space (in fact, many would probably lose donors if they set up lavish shops.) They do want lower rents, though.

According to a 2007 Staubach Company study, the D.C. market costs far more than others in the region. Much of this difference comes from D.C.’s vastly higher taxes. D.C. charges over $11,000 a year in property taxes for a 1,000 square-foot downtown office a non-profit might want. In Crystal City, about the same distance from the Capitol as downtown, Arlington County demands less than $3,000.

As a result, Northern Virginia now has somewhere around 30,000 non-profit jobs. Many of these would benefit from being in the District, and would move if the District only made it simpler. Of course, lower property taxes would have similar benefits for any other type of business that wants to locate in the District. D.C. has to recognize the power of its non-profit sector. And, to do that, it should give non-profits the freedom from excessive taxes and regulation that nearly all businesses want.