Members of the blue-ribbon President's Committee on the Arts and Humanities, as well as witnesses from the Metropolitan Museum of Art and other major cultural institutions, warned yesterday that Reagan administration proposals to eliminate or reduce deductions for charitable donations would cripple the nation's museums, universities, symphonies and other nonprofit cultural organizations.
"If this occurs," said former Treasury secretary C. Douglas Dillon of the tax reform plan, "substantial violence would have been done to the unique American social tradition of encouraging private support."
He spoke during a President's Committee hearing held at the Old Post Office Building. The committee was created by President Reagan in 1982 to increase private-sector support of the arts at a time when the Reagan administration was working to cut federal arts funding.
Its members include National Gallery of Art Director J. Carter Brown, Librarian of Congress Daniel Boorstin and singer and presidential friend Frank Sinatra, whose brown Cadillac with vanity plates "My Way" was parked on Pennsylvania Avenue during the testimony.
Sinatra did not speak, but many who did described the situation as paradoxical: a tax plan they believe would drastically reduce charitable deductions from an administration that has said the private sector, and not government, should support the arts.
"These institutions will have to make up for lost revenue," Brown warned. "One way to make it up is increased government help directly. That has got to be part of the package, because it is not going to happen otherwise."
Some observers of yesterday's proceedings described them as extraordinary. "For the very first time, we've heard the paradox articulated," said Larry Reger, director of the American Association of Museums, a trade group that represents many of the nation's 5,500 museums.
Gallery Director Brown and other committee members said that while they agree in principle with the broad objectives of tax reform, they would fight the changes now under consideration.
"It is terribly important to persuade the administration not to send up these proposals," said William Macomber, president of the Metropolitan Museum of Art. "I would urge you all to really bear down . . . on the executive."
In addition to witnesses from Columbia University and the Metropolitan Museum of Art, a National Park Service official read the committee a Feb. 6 letter from then-secretary of the interior William Clark to White House Chief of Staff Donald Regan.
The letter criticized a proposal to eliminate the charitable deduction for money spent on rehabilitation of historic buildings. "This recommendation does not appear consistent with the Administration's publicly stated purpose of encouraging historic preservation through stimulation of private investment rather than through direct federal grants or subsidies," the letter said.
The only support for the specifics of the administration plan came from Ron Perleman, assistant treasury secretary for tax policy, who spoke briefly to defend the plan.
"Please be sensitive to the fact that two-thirds of American taxpayers in this country do not itemize. They do not look at existing deductions as fair breaks," Perleman said. He urged committee members to remember the "person who doesn't have the luxury of giving appreciated property," whose charitable donations come out of wages or cash.
There were conflicting statistics bandied about yesterday by committee members and witnesses alike, a reflection of the varying opinion as to the effect the changes would have on charitable giving. Some economists have estimated that the administration's tax reform proposal would cut private charitable contributions by $12 billion. Other economists predict much smaller reductions. The White House has not said when it will present its final tax reform package to Congress.
Among the proposed changes:
* The so-called "above the line" deduction allowing Americans who do not itemize to deduct charitable gifts would be abolished.
* For those who do itemize, only contributions in excess of 2 percent of gross income would be deductible.
* Contributions of real estate, property and art objects would be valued for tax deduction purposes at their acquisition price plus adjustment for inflation, rather than current market value, which critics say would lead more donors to sell their assets rather than donate them.
Earlier this month, appointees to the advisory council of the National Endowment for the Arts unanimously approved a resolution against the proposed changes.
The President's Committee stopped short of that, however. "We're knee-deep in resolutions and ankle-deep in knowledge," said committee chairman Andrew Heiskell. The committee decided instead to summarize its findings and opinions and relay them to the White House.