Nonprofits and the Fiscal Cliff

posted on: December 4, 2012

by Aaron Dorfman

Editor’s note: This commentary first appeared on The Huffington Post.


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What should be the top priorities for nonprofit organizations during the fiscal cliff negotiations?

If you’ve been listening to the associations that claim to represent nonprofits and foundations, you could easily believe that fighting off any change to the charitable deduction is the only issue that matters. Nothing could be further from the truth. Policies that incentivize charitable giving are important, but nonprofits should be far more concerned about several other elements of the fiscal cliff negotiations.

Our number one priority should be to raise tax rates on the wealthy by allowing the Bush tax cuts to expire for Americans earning more than $250,000 per year. We should also seek to prevent cuts to vital programs that serve poor and elderly Americans and to secure strategic investments that stimulate the economy and create jobs.

These priorities were put forward in an open letter from groups like the National Association for the Advancement of Colored People, National Domestic Workers Alliance, Center for Community Change and Leadership Center for the Common Good — groups that truly represent millions of grassroots community residents and exemplify some of the most important work being done by nonprofits in our nation today.

But the message from the sector’s purportedly representative trade associations like Independent Sector, National Council of Nonprofits, Council on Foundations and Philanthropy Roundtable — has been very different. These associations have focused almost exclusively on protecting the charitable deduction in its current form and have remained silent on tax rates for the wealthy or any other issues at stake. The United Way, the Red Cross and most other large national charities are also guilty of this approach.

To its credit, Independent Sector is basing its lobbying on a set of principles that also emphasizes the importance of not cutting services to the poor. Others are also including that point, but their lead message is clear: don’t touch the charitable deduction.

To focus on the charitable deduction is to miss the forest for the trees. As I have argued previously, changes in the deductibility of charitable contributions like those President Obama has proposed on several occasions will have only a modest impact on the nonprofit sector.

I understand why the Philanthropy Roundtable and its lobbying arm, the Alliance for Charitable Reform, won’t advocate for higher tax rates on the rich. The group gave its philanthropist of the year award to Charles Koch (see my critique). It generally prefers private charity to government, when both are necessary to meet society’s needs.

But what about the other organizations? Why aren’t they advocating as forcefully for higher tax rates on the rich as they are against changes to the charitable deduction?

It’s time for the nonprofit sector’s leadership to face facts. Government needs sufficient revenue to play its proper role in society. Elections have consequences, and President Obama won reelection convincingly with a promise to ensure the wealthiest among us pay their fair share. If the wealthy are going to pay more, that can only come from higher rates or a cap on deductions. If the large trade associations don’t want revenue to come from a cap on deductions, they would be wise to support the president’s call for higher tax rates on big earners.

On Dec. 4 and 5, an army of lobbyists from these groups and others will descend on Capitol Hill and attempt to block any changes to the deductibility of charitable donations as part of the fiscal cliff negotiations. I hope by then they’ve adjusted their message and are also forcefully advocating for higher tax rates on the wealthiest Americans. If not, they may be — and perhaps should be — dismissed as just another special interest protecting its own privileges.

If you work for or volunteer with a nonprofit organization, I urge you to make sure your congressional representatives hear directly from you with a message that more accurately reflects your values. Personalized communication is always best, but Campaign for America’s Future has a terrific take action page that allows you to send email directly to your representatives and senators.

Don’t let members of Congress get the wrong idea about what really matters to nonprofits. Most of us understand that much more is at stake during the fiscal cliff negotiations than the charitable deduction.

Aaron Dorfman is executive director of the National Committee for Responsive Philanthropy (NCRP). He frequently blogs about the role of philanthropy in society.