Nonprofit power brokers cry wolf

By Todd Cohen

The big players in the charitable sector are moaning and groaning again, this time over proposals by the Obama administration to trim the charitable tax deduction for wealthy Americans, and to raise their marginal income tax rates, proposals the big players say would damage nonprofits and their clients.

But new studies suggest the sector’s power brokers, as they tend to do, are overstating their case in an effort to protect the assets and interest of the big organizations and donors they represent.

Diana Aviv, president and CEO of Independent Sector, a trade group that counts big nonprofits and foundations among its members, told Congress this month that reducing the value of the charitable deduction for taxpayers earning over $200,000 a year would “blunt the impact of services across the sector,” and that reducing incentives to give would “hurt all charities and the people they serve.”

And the Council on Foundations, along with 148 foundations, told lawmakers the proposed cap on itemized deductions would have a “severe impact on charitable organizations and would greatly impede the work they do for the millions of Americans who rely on their vital programs and services.”

But a new study, conducted by the Center on Philanthropy at Indiana University and sponsored by Campbell & Company, concludes the proposals, by themselves and in the short-term, likely would result in a “relatively modest decline” in charitable giving.

A separate study, by Fidelity Charitable, finds that despite continuing economic challenges, American donors “remain committed to charitable giving” and are “planning ahead for it and giving even when there is no expectation or incentive to do so.”

And a third study, by Changing Our World, says that with state and federal funding shrinking, nonprofits should be retooling their finances and programs while also developing a culture of innovation that will help them adjust to future financial crises.

In peddling fear by claiming the Obama proposals will cripple fundraising throughout the nonprofit world, the big trade groups in the charitable marketplace are misusing and misleading small, community-based nonprofits and their clients that have been hit hard by an economy defiled by corporate greed.

Sadly, and shamelessly, those trade groups are using small nonprofits and their clients as a human shield to protect the wealth of the richest Americans, and the big philanthropies they create and support, at the expense of proposed social programs that aim to address the urgent needs of the same vulnerable populations the trade groups say their well-endowed patrons care about.

In a recent blog, Rick Cohen, national correspondent at The Nonprofit Quarterly, characterized the “dire warnings of a nonprofit catastrophe” by the nonprofit sector’s leadership as “hardly a ‘profile in courage’ moment” and “just embarrassing.”

Whenever they get a whiff of efforts to more tightly regulate big philanthropy, the big trade groups for nonprofits and foundations stomp their feet.

They act, Cohen, says, “sort of like a traditional old special interest.”

Several years ago, those trade groups squealed like stuck pigs over moves in Congress to better police the sector, which harbors its fair share of organizations hooked on wealth, power, excess and cronyism but remains virtually unregulated.

The findings from the study by Fidelity Charitable simply reflect the fact that true philanthropists, regardless of the size of their income, bank account or donation, give because they want to help people and places in need, not because they are looking for ways to save money on their taxes.

Instead of engaging in scare tactics that exaggerate the potential impact on nonprofits of proposed reductions in tax breaks for wealthy Americans, the sector’s leadership should be looking for ways to help nonprofits better adapt to a changing world and shrinking government support by developing new partnerships and revenue sources, better engaging donors, and helping donors see that their support will help address urgent social and global problems.