In part, the White House is seeking to win the support of nonprofit groups for Obama’s central demand that income tax rates rise for upper-end taxpayers. There are early signs that several charities, whose boards often include the wealthy, are willing to endorse this change.
But the White House is also looking to limit the charitable deduction for high-income earners, and that has prompted frustration and resistance, with leaders of major nonprofit organizations, such as the United Way, the American Red Cross and Lutheran Services in America, closing ranks in opposing any change to the deduction.
“It’s all castor oil,” said Diana Aviv, president of Independent Sector, an umbrella group representing many nonprofits. “And the members of the nonprofit sector I represent don’t want any part of it. It’s a medicine we’re not willing to drink.”
The dispute is the latest in a long-standing struggle over the popular tax provision, which allows people to deduct charitable donations from their taxable income. The battle is playing out at the highest levels of government and in the corridors of K Street.
Since Obama first proposed to lower the deduction in 2009, more than 60 nonprofit groups have spent at least $21 million lobbying Congress and the White House to preserve it, lobbying records show. Although nonprofit officials characterize the effort as grass roots, including a recent “Lobby Day” during which the groups’ staffers donated their time and descended on Capitol Hill, at least 25 organizations have hired Washington area lobbying firms.
The lobbying by some of the biggest players in the philanthropy world has intensified in recent weeks amid spreading concern over whether the charitable deduction could be affected by a deal to avoid the automatic spending cuts and tax increases set to kick in Jan. 1. Nonprofit group leaders say lowering or eliminating the deduction would reduce giving by wealthy donors. Studies have shown that people would donate less if the deduction were reduced, but estimates of the effect vary widely.
“It would be devastating,” said Jatrice Martel Gaiter, executive vice president for external affairs at Volunteers of America, which has paid Patton Boggs — Washington’s most lucrative lobby shop — nearly $200,000 to lobby on the charitable deduction and other issues in the past year. “Of course people want to say they are giving out of the goodness of their hearts, and of course they are, but the tax deduction makes our hearts larger and our goodness even better.”