News and analysis
December 07, 2012

White House Accused of Bullying Nonprofits on Tax Hikes

President Obama’s continuing efforts to enlist nonprofits to support higher taxes for the wealthy have led Republican critics on Friday to say the White House is using “bullying” tactics and spurred at least one philanthropic group to reject the president’s request.

The Alliance for Charitable Reform, a group of foundations and donors that is a project of the conservative Philanthropy Roundtable, officially refused President Obama’s plea for support, saying it was surprised he is luring nonprofits into the middle of a political fight by claiming to be concerned for a tax deduction for charitable giving that he has tried to limit for years.

The alliance’s position came just hours after White House officials hosted a conference call at 11 a.m. on Friday to instruct nonprofit officials on how best to pressure Congress into supporting the president’s plan to raise taxes on the wealthiest 2 percent of earners. A second call was held at 3 p.m. with foundation leaders.

Both were led by Jonathan Greenblatt, director of the White House Office of Social Innovation and Civic Participation, who instructed participants not to share what was discussed on the call with the press.

Mr. Greenblatt had sent an e-mail to many nonprofit leaders requesting that they write op-ed articles and make public statements supporting tax-rate increases to protect the services they deliver to the neediest Americans.

Republicans were critical of the strategy to pressure nonprofits into supporting the president.

“Today, the White House chose to mislead and scare America’s charitable-giving community, using them as pawns in an effort to achieve their tax-hike proposal,” states a joint press release from two Republicans, Rep. Dave Camp of Michigan and Sen. Orrin Hatch of Utah. “Instead of bullying our nation’s charities, the White House should look at the calendar, stop the political campaign, and start negotiating with Republicans.”

Concerns About Politics

The conference calls on Friday followed a Tuesday night meeting at the White House between the most senior Obama administration officials and top nonprofit leaders.

The White House officials asked the nonprofit leaders to include a message on supporting tax-rate increases during a planned daylong lobbying effort on Wednesday on Capitol Hill to convince lawmakers to protect the charitable deduction from any limits in fiscal-cliff negotiations.

More than 250 nonprofit officials were involved in that effort by the Charitable Giving Coalition. But the leaders from Independent Sector, American Red Cross, United Way Worldwide, Catholic Charities, and others who attended the White House meeting chose not to pass the message along to their members.

The Alliance for Charitable Reform was also involved in the Wednesday lobbying effort.

Its statement on Friday was the first to formally reject the president’s request.

The alliance expressed surprise that President Obama was now saying his motivation was driven by a desire to preserve charitable giving.

“Throughout his first term, President Obama has proposed reducing itemized deductions, including the charitable deduction, in multiple budgets and other spending proposals and never voiced concern over the impact of his plan on the charitable sector,” states a press release from the Washington organization. “Charities and those who give to charity should not be forced to enter this political wrangling.”

Alison Hawkins, a spokeswoman for the alliance said the White House’s request was “out of bounds” and that nonprofits should be kept “above the political fray.”

Later in the day, Independent Sector released a statement reiterating its position that any deficit-reduction plan should include revenue increases. What’s more, it said, “we strongly believe the charitable deduction has no place in discussions about the fiscal cliff, and we are not interested in getting in the middle of a partisan political struggle.”

Cap on Deductions

President Obama has declared that there will be no deal to avert the fiscal cliff without increases in tax rates. He wants to raise the highest rate now paid, 35 percent, to 39.6 percent on the wealthiest taxpayers.

Republican House Speaker John Boehner has rejected the concept and wants to produce more money for the Treasury by closing tax loopholes and deductions.

White House officials have been telling nonprofit leaders that the Republican plan includes a proposal to place an annual limit on all itemized deductions, including the mortgage deduction, at $17,000 to $50,000 per taxpayer.

President Obama’s plan proposes to reduce the tax break that wealthy people get for their charitable gifts from 35 percent to 28 percent.

Nonprofit leaders say a cap could decimate charitable giving because most affluent people would take the mortgage deduction first and have no room to deduct charity breaks. The reduction in the tax break could shave off upwards of $6-billion in charitable giving, the White House says.

Split Among Charities

On a blog post published Friday and aimed at nonprofit leaders, the president wrote: “A $50,000 cap would reduce charitable giving by about $150-billion over 10 years, while a $25,000 cap would reduce giving by about $200-billion. Even a $25,000 cap that applied only to high-income households would reduce giving by at least $10-billion per year.”

Many nonprofit leaders agree with the president that charity officials should be advocating for the increased tax rates. Others worry that doing so could dampen charitable giving from the wealthy donors who give the most money.

Aaron Dorfman, executive director of the National Committee for Responsive Philanthropy, attended the Tuesday night meeting and wrote a blog post supporting the White House the next day.

“I emerged from that meeting more convinced than ever that the right course for the nation is for all of us to unite around raising tax rates on the wealthiest Americans, allowing the Bush tax cuts to expire for top earners,” wrote Mr. Dorfman. “If nonprofit leaders don’t want changes to the charitable deduction, it is imperative that we get behind the president’s call for higher tax rates on the wealthy.”

The Alliance for Charitable Reform, however, states that both plans to limit the deduction should be “off the table,” according to its statement.

“We should not be forced to chose between two bad options,” the alliance statement said.