Dec. 11 (Bloomberg) -- The fiscal dispute in Washington weighs heavily on Brian Gallagher, president and chief executive of United Way Worldwide, the largest U.S. charity.
Gallagher, 53, fears that the nonprofit’s 11 million donors and the $5.14 billion United Way raises annually might decline if Congress imposes limits on the amount that can be deducted for charitable donations on tax returns.
A native of Chicago, Gallagher started working at the United Way in 1981. I spoke with him over lunch at Bloomberg’s world headquarters in Manhattan.
Cole: President Barack Obama told Bloomberg Television recently that eliminating charitable deductions could harm nonprofits and is “not a realistic option” for reducing the deficit. Are you less worried now about the law being changed?
Gallagher: I find the comment ironic in that in each budget he’s proposed to Congress, he’s proposed capping the charitable deduction for the high wage earners. For the president to say that he’s a champion of the charitable deduction, I find interesting.
Cole: You sound skeptical about whether the White House will protect the interests of nonprofits.
Gallagher: I’ve been in Washington for 10 years now, and what I’ve learned is that people in Washington know how to stop things. Democrats know how to do it, Republicans know how to do, lobbyists know how to do it, nonprofits know how to do it.
Cole: Who can you call in Washington to talk about the charitable deduction issue?
Gallagher: My direct communication into the White House is Valerie Jarrett (senior adviser to Obama). I’ve said to her, if we’re going to have a serious tax-reform conversation, we’re all in. We’ll have that conversation. If you’re going to try to cherry-pick the charitable deduction, then we’re going to oppose it.
What’s interesting and probably good is that the charitable deduction is now part of the tax-reform conversation. It’s positive if it’s a long-term comprehensive discussion. It’s negative if it’s about finding money (to reduce the deficit), and right now it’s about finding money.
Cole: How do you think donors to nonprofits would react if charitable deductions are limited?
Gallagher: In our survey, 67 percent of Americans said do not touch the deduction, and 3 out of 10 Americans use the deduction when making a charitable gift. The misnomer is that this has gotten tied up in wealthy people instead of all people. If you look at who uses it, it is in percentage equal to those who make $50,000 to $100,000, those who make $100,000 to $200,000 and those who make $200,000 or more. The debate is that this is all about millionaires and billionaires. It’s not.
Cole: What worries you most about a decline in charitable giving?
Gallagher: My biggest concern is that we’re going to start peeling away at the fabric that made private philanthropy and private initiative that de Tocqueville wrote about in the 1830s, which is a part of America. The income gap is as wide as it’s been since the 1920s. So if you look at philanthropy, the growth is coming from people who make a lot of money.
Cole: What’s to blame for this situation?
Gallagher: Our politics is to blame. What Washington hasn’t been able to do for a while is figure out how to build a coalition that actually gets something done.
Cole: Can you predict an outcome?
Gallagher: I believe that taxes really won’t be dealt with in the lame-duck session. There will be a different solution going into the next six months of next year, and reform will happen. Our situation is so dire that folks realize that we have to do a deal.
(Patrick Cole is a reporter for Muse, the arts and leisure section of Bloomberg News. The opinions expressed are his own. This interview was adapted from a longer conversation.)
Muse highlights include Laurie Muchnick on books, Catherine Hickley on art.
To contact the reporter on this story: Patrick Cole in New York at pcole3@Bloomberg.net.
To contact the editor responsible for this story: Manuela Hoelterhoff in New York at Mhoelterhoff@bloomberg.net