Being competitive is not illegal and non-profits are not forbidden from creating better products. I don't understand what about that argument would be coherent.
Wikipedia could be a lot better but it could be a lot worse too - the current pressure tactic can only make matters worse. The key point here is that if Wikipedia cannot be tax free, nobody should be, just remove that as a legal possibility because it can be used to suppress some views and promote others simply by arbitrary definitions of "propaganda".