White House Jobs Plan Short-Shrifts Nonprofit Employers

Print Share on LinkedIn More

September 15, 2011; Source: Independent Sector | Leaving Independent Sector’s knee-jerk opposition to President Obama’s proposal to cap charitable tax deductions for wealthy people to one side for the moment, IS has uncovered what looks like a real problem with President Obama’s proposed jobs plan: “The President’s proposal in many instances does not treat nonprofit employers equitably,” they say in a statement released last Thursday. “The tax incentives made available to nonprofits to hire veterans and unemployed individuals are only two-thirds of the amount available to for-profit employers.”

According to a White House fact sheet and an article by Suzanne Perry in the Chronicle of Philanthropy, the Obama jobs plan would provide different benefits to nonprofit and for-profit employers:

Obama Jobs Plan Proposal

Incentive for Nonprofit Employers

Incentive for For-Profit Employers

Tax credit for hiring the long-term unemployed

Up to $2,600/employee

Up to $4,000/employee

Tax credit for hiring unemployed veterans

Up to $1,560/employee

Up to $2,400/employee

Tax credit for hiring long-term unemployed veterans

Up to $3,640/employee

Up to $5,600/employee

Tax credit for hiring long-term unemployed veterans with service-connected disabilities

Up to $6,240/employee

Up to $9,600/employee

The White House explains that “the tax-credit amount for nonprofits is adjusted to reflect the fact that there are no taxes paid on profits and no deductions for wages paid to employees generating the tax credits. When these factors are considered, the value to a nonprofit is similar to the value claimed by a for-profit firm.”

Perhaps you remember this sort of statement from our past articles on the health insurance reform debates in 2009 and 2010. At that time, the White House generated a bunch of tax-related incentives to help small businesses purchase or keep health insurance. When challenged about the notion that nonprofits were employers too—equally hard-pressed to pay for health insurance but not helped by the tax credit proposals—the President’s Council of Economic Advisors (CEA) appeared surprised and stunned. The CEA dithered until members of Congress stepped in to amend the ACA so nonprofits could benefit. But in that case too, the benefit packages for nonprofits were noticeably smaller for nonprofit employers than for their for-profit counterparts.

It is nice to see that the White House remembered that embarrassing event and at least decided to recognize nonprofits as bona-fide employers this time. But, sorry, we still don’t buy the White House’s justification for the smaller incentives for nonprofits. Nonprofits pay costs that for-profits don’t—notably by serving clients that for-profits might consider “uneconomic”—and no one in the nonprofit hierarchies gets to pocket a share of the organization’s “profits.” Despite all the other programs and services that nonprofits might be able to partake in as part of Obama’s American Jobs Act, there is no reason for nonprofits to get less support in creating jobs. Do you agree?—Rick Cohen

  • Diane Manning

    Absolutely. As an employer I indeed pay all of the payroll taxes that a for-profit does, and typically provide higher benefit levels than many/most small businesses, since they help me to recruit and retain the specialized workforce I need to provide high quality healthcare and community services. This model implies that our tax status as non-profit means we somehow are less “real” businesses, rather than businesses that contribute our “profits” when we rarely have them, back into providing additional services for our communities.

  • Anita Stuever

    What’s the objective of the program? If it’s to employ people, it doesn’t matter whether those new employees work for nonprofits or businesses intended to produce profit. If both types of organizations accomplish the objective to employ more people, why wouldn’t the incentives match? Either way, the program helps the people who are hired, and helps keep them off public support. Is the program less beneficial to the employment goal when people work for nonprofits?