President George W. Bush's effort to repeal the estate tax has revealed contradictions in the nonprofit sector and confusion about what it values and where it stands. While most charities ought to care deeply about repeal's effects, too few have protested. They should.
First, repeal will increase concentrations of wealth. With economic inequity already at record levels, repeal will profit only the top 2 percent of Americans--almost half of its benefits will flow to the top one-thousandth of estates. Second, it will severely reduce government's ability to balance budgets, pay down deficits and make important social investments. Repeal will cost state and federal governments more than $300 billion in lost revenue during its phaseout and much more thereafter. Third, repeal removes the tax benefits for bequests to charity: Contributions are expected to drop by between $5 billion to $7 billion or more a year.
Our economic boom has challenged the notion that a rising tide lifts all boats--some stay mired in the mud. The very thinnest layer of people at the top have profited immensely, while those below have done considerably less well. Repeal of the estate tax will exacerbate this dynamic rather than improve circumstances for nonprofits' clients: the middle class, the working poor and those in poverty. Thus, it is logical that charities would oppose repeal in the interest of those they serve.
But most do not. Nonprofit leaders seem disinclined to talk about equality. Most charities avoid discussion of fundamental issues such as economic, social and political justice. Increasingly, nonprofits provide services in an effort to help individuals instead of advocating changes to bring about more equitable and humane outcomes for groups of people.
Too many nonprofit leaders are hesitant to push for causes that might not be popular. Objecting to estate-tax repeal on the grounds that it benefits only the very wealthiest exposes leaders to charges of fomenting class conflict in our classless society, of being a divider instead of a uniter. Charities know that the rhetorical effectiveness of repeal's advocates in calling it a "death tax"--of making it seem that repeal is in the broad public interest--increases the likelihood of bad public relations for opposing repeal. Politicians warn that opposition to repeal will cost charities dearly on other policy initiatives.
The second reason to fight repeal also is unpalatable to nonprofits--it argues for the essential role of government. Bush and compassionate conservatives cast problems as individual, local, moral and keyed to people's personal responsibility for their own sad circumstances. This makes it difficult for nonprofit leaders to ascribe critical importance to federal programs and to insist on their adequate funding. Too many nonprofits seem fearful of being seen as advocates of Big Government, of calling for more public spending on critical domestic needs.
Finally, repealing the estate tax will have a huge adverse impact on charities' ability to raise money. Yet, as much as some nonprofits and foundations depend on bequests, most shy from a position that might offend their wealthy donors and board members. This in spite of the fact that some of the super-wealthy have declared themselves against repeal.
For whatever reasons most still remain on the sidelines, charitable organizations--from the sector's national representatives through to local groups--must now be heard from on the estate tax issue and many of Bush's other initiatives. As uncomfortable or frightened as some might try to make them feel, nonprofit and philanthropic leaders are confronted by an administration that requires them to engage a range of policy debates or to be transformed by an agenda that they do not even attempt to shape. That would be tragic. With silence, charity will fail both itself and the broader public good.