Federal lawmakers are heading into an intense period of political and policy debate about the budget, deficit reduction and tax reform. There is growing and urgent concern that elected officials are seriously considering unraveling a 100-year-old American tradition that encourages charitable giving and benefits millions of people. In jeopardy is the provision that allows taxpayers to deduct donations to charities.
More than 13 percent of all taxpayers in West Virginia use this deduction, which is designed to encourage donors to support worthy causes. Add up the donations they made to charities in 2010, and it comes to more than $467 million.
It's important to recognize that donors at all income levels itemize their deductions -- not just the wealthy. In fact, nearly 70 percent of West Virginia's taxpayers who use the charitable deduction are middle to low-income households with 11.5 percent of these taxpayers earning less than $50,000 a year.
It is worth noting that West Virginia is fortunate to be home to so many people who carry on the unique American tradition of charitable giving. We have foundations willing to take a leadership role to encourage philanthropy, and residents willing to dig deep into their pockets to help those who are less fortunate.
Despite this spirit of generosity, West Virginia still faces philanthropic challenges as most recently we were ranked 47th in the nation for charitable giving (including itemized donations and nonitemized giving) when compared with other states, according to the Boston College Center on Wealth and Philanthropy. Also, the Big Sky Institute defines The Mountain State as on the "Philanthropic Divide," meaning that we are in the bottom 10 in the country when looking at charitable giving, foundations based here, and grants received per capita.
Most recently, the U.S. Senate Finance Committee's chairman and ranking member have proposed to remove all deductions and credits from the tax code, including the charitable deduction. In West Virginia, where we are working to grow charitable giving and recognize the critical role it plays in our communities, removing or changing the deduction would have catastrophic effects on the nonprofits that serve hundreds of causes and thousands of families across the state. While elected officials in Washington express support for the value and impact of charitable giving, this proposal by the Senate Finance Committee, along with many others in the U.S. Senate and House poses a real threat to incentives that encourage generosity.
According to a recent public opinion poll conducted by United Way Worldwide, nearly 80 percent of Americans agree that reducing or eliminating the charitable deduction would have a negative impact on charities and the people they serve. Nearly two-thirds say they would have to reduce their contributions by a significant amount -- 25 percent or more. Americans are a giving people and are likely to support worthy charities whether there is a charitable deduction or not, but the charitable deduction often will encourage people to give more. Between 2009 and 2010, West Virginia saw a $50 million decline in charitable giving.
Charities and philanthropy play a vital role throughout the Mountain State and especially in the Kanawha Valley. When our region and state were struck by two natural disasters in 2012, charities and foundations stepped up to respond. Many citizens in our region have been hit hard by the economic recession. We hear countless stories about how people's lives have been turned upside down after facing the loss of a job or a home. Charities in the region are working hard to help those affected by crisis with basic needs like food, clothing and shelter, and these same charities are reporting an increase in demand for their services.
In fact, a recent survey from the Nonprofit Finance Fund reveals that for the first time in the survey's five-year history, more than half of the charities say they could not meet demands for assistance last year, and expect the number to increase this year. One in four had less than 30 days' cash on hand. We should proceed cautiously in making any decisions that could worsen the situation for charities that are still reeling from the effects of the recession.
Tough decisions must be made to tackle the nation's fiscal challenges without hurting our communities. At a time when charitable contributions are more vital than ever to meet the growing needs in our communities, it seems unwise for Washington to consider changes as part of tax reform that would hurt the charitable community and the valuable services it provides. It is critical to keep the current level of the charitable deduction in our tax code without changing or manipulating it.
Now more than ever, we should be working together to find ways to encourage more giving, not less.
Daugherty is president and CEO of West Virginia Grantmakers, the statewide network of foundations, giving programs and philanthropists, wvgrantmakers.org. Ceperley is president and CEO of The Greater Kanawha Valley Foundation, tgkvf.org.