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Paul Nitze: Making charities more untouchable

Paul Nitze
The Aspen Times
Aspen, CO Colorado

Over the years Aspen has picked up a swanky set of sister cities around the globe, now totaling seven. They’re all resort towns, like Chamonix in France and Queenstown in New Zealand, and none are budget destinations. But there’s one thing you’re not going to get a lot of in those sister cities, and that’s culture.

Davos is the big exception, but chances are you won’t get a brain workout if your vacation takes you to Garmisch or Bariloche. The reasons for Aspen’s cultural riches date back to its modern founding, when Walter and Elizabeth Paepcke established the Aspen Institute, the Aspen Music Festival, and a number of other bedrock Aspen institutions. Nevertheless, Aspen wouldn’t be where it is today if people hadn’t made millions of dollars in gifts to new and existing nonprofits in the six decades since.

So Aspenites are as likely as any small towners to get nervous about the Obama administration’s plans to make it a little bit more expensive to give to charity. I’m talking about a provision in the White House’s budget proposal to drop the amount of a contribution you can deduct from your taxes from 35 percent to 28 percent. No need for us to man the barricades though ” leading figures in the nonprofit sector are already in full-throated outcry.

It’s estimated that this provision would only trigger a 5 percent drop in contributions from those in the top tax bracket, due mostly to the fact that the Alternative Minimum Tax prevents a lot of those taxpayers from taking the full 35 percent deduction anyway. Despite the marginal impact on giving, heads of philanthropies are putting on a full-court press because they see this as a first step to undermining the sacred tax status of charitable gifts.

Steve Gunderson, head of the Council on Foundations, has told the press that in these already penurious times, when charities can’t rub a couple nickels together, this will put even more of them out of business. The Independent Sector, an umbrella group for charities, has issued a statement praising the budget but telling the administration to raise cash somewhere else.

I’m here to tell you this is malarkey, and there’s nothing sacred about tax-free giving. There is simply no good reason why a cut in the charitable deduction shouldn’t be on the table. In a world that’s tax free (and full of candy canes and endless powder days and red roses), I’d love to make it as cheap as possible to support one’s favorite charity, but these days we need to have a frank conversation about tax policy.

Giving to charity is a form of consumption, just like ordering a fat porterhouse at your local steakhouse. Simply because others benefit from our gift doesn’t change the fact that a contribution reflects a personal choice about how our community’s priorities should be ordered. On top of that, it’s a means of bolstering the donor’s prestige, particularly for those whose reputation could use a spit shine. If you have any doubt, talk to the folks running the Vilar Center for the Arts in Beaver Creek, whose patron is facing up to 20 years in prison on fraud and money laundering convictions.

We are lucky indeed to live in the United States, where our nonprofit sector thrives on private contributions. Other rich nations have anemic levels of giving, mostly because the government is expected to pick up the tab. Our charities are better run and more responsive to social needs than those abroad because the heads of our charities have to beat the drum for contributions each year instead of relying on a line item in a government budget. Moreover, our charities provide a check on corporate and government power because they are an independent power center in their own right.

Yet for too long, we have tolerated a fundamental arrogance from those in the nonprofit sector who think that preferential tax treatment is a birthright. Not only do charities bristle at having their tax benefits pared back, they kick and scream when subjected to greater oversight. Unfortunately, just as in the business community, executives at nonprofits sometimes commit fraud and abuse, or waste money on things their donors never intended.

Now that a progressive wind is blowing in Washington, some groups are calling for the White House to push laws that would favor some kinds of gifts over others. The idea here is that if you give to your local methadone clinic or soup kitchen, you get the full tax break, but if you give to the opera house or some similarly elitist and exclusive institution, you get only a partial deduction. Some are calling for preferential treatment for gifts to groups that help minorities or other “under-served communities.”

Suffice it to say this is a really bad idea. Once we go down the road of favoring some charitable gifts over others, we’ve undercut much of what makes our nonprofit sector so vibrant in the first place. But those who want to maintain the status quo would be wise to remember that existing tax policy means that the government subsidizes every dollar in private giving. Those in the nonprofit sector who want the gravy train to continue while keeping the government out of their business are asking too much.


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