As federal lawmakers head into an intense period of debate about the budget deficit and tax reform, they are seriously considering removing/reducing the provision allowing taxpayers who itemize to deduct their gifts to charity. More than 13 percent of all West Virginia taxpayers use this deduction to support worthy causes; their gifts in 2010 exceeded $467 million. And, donors at all income levels itemize charitable deductions - nearly 70 percent of the state's taxpayers using the charitable deduction represent middle- to low-income households.
Recently, the U.S. Senate Finance Committee's chair and ranking member proposed removing all deductions and credits from the tax code, including the charitable deduction. In West Virginia, where we're working to increase giving and where we recognize the crucial role it holds in improving our communities, reducing the deduction could have catastrophic effect.
While our state is fortunate to be home to many people who carry on the American tradition of charitable giving, communities throughout our region face serious resource challenges at a time when local needs and demand for services only continue to increase. Our region's hardworking nonprofit groups serve hundreds of important causes and thousands of families statewide. Giving to these valuable community partner organizations would likely be impacted by any reduction or elimination of the charitable deduction.
While elected officials in Washington say they value charitable giving, the current U.S. Senate Finance Committee proposal and others in the House and Senate would significantly reduce the one tax incentive that stimulates giving. According to a United Way worldwide public opinion poll, nearly 80 percent of Americans agreed a reduction in the charitable deduction would negatively impact charities and those they serve. Nearly two-thirds said reducing the deduction would cause them to reduce contributions significantly, by 25 percent or more.
Charities and philanthropy serve a vital role in West Virginia. Many citizens have been hit hard by the economic recession. We hear countless stories about how people's lives have been turned upside down following a job or home loss. Nonprofits and faith-based groups are working diligently to help those most affected by crisis to meet basic needs like food, clothing and shelter. These same charities report an increase in demand for their services while concurrently, given these difficult economic times, those who support them have had more demands placed on their resources.
While tough decisions must be made to tackle the nation's fiscal challenges, to discourage the public from participating in charitable giving by removing the tax deduction makes little sense. Americans are a giving people who will likely support worthy charities whether or not a charitable deduction exists, but the presence of a tax deduction logically encourages many people to give more.
At a time when government is reducing services and nonprofits are shouldering an increasing service load, charitable gifts are more essential than ever to meeting our communities' growing needs. We need to be working together to find more ways to encourage giving; thus, it is important to call on our elected representatives to retain at least the present level of charitable deduction in our tax code.
EDITOR'S NOTE: Judy Sjostedt is executive director of the Parkersburg Area Community Foundation.