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House passes tax cuts to spur more donations

The Associated Press

WASHINGTON — The House on Wednesday passed more than $12 billion in tax cuts to encourage charitable giving, while some Democrats said the bill’s generosity will cost future generations billions in extra debt.

The bill, passed 408-13, is the legislative offspring of President Bush’s effort to give religious organizations federal money and encourage them to take a bigger role in providing social services.

Majority Whip Roy Blunt, R-Mo., said the tax breaks will encourage $45 billion to $50 billion in additional charitable donations over the next decade.

“It’s really about $50 billion — $50 billion that the American people decide they want to give to charities to help their fellow citizens,” he said.

The biggest tax break gives new charity-contribution incentives to taxpayers who can’t deduct charitable donations from their taxes because they don’t itemize their deductions. Taxpayers using the standard deduction could deduct up to $250 in charitable contributions. The new deduction would be in effect for two years.

Rep. Harold Ford, D-Tenn., said the new deduction will reward those who regularly give small amounts to their churches or other local charities.

“They want to give, but they also want to have money to pay the bills,” Ford said. “This bill is one way we can empower people to give more to charity, for it empowers those whose compassion runs deep, especially those who do not have deep pockets.”

Other Democrats praised the bill but argued that its $12.7 billion, 10-year cost should be paid for by shutting down corporate tax shelters. The Senate’s version of the bill, passed in April, included language targeting illegal tax shelters and would cost the Treasury nothing.

“For every tax cut we give today, it goes on the deficit, and your kids and your grandkids are going to pay for it,” said Rep. Jerry Kleczka, D-Wis., calling himself “the skunk at the picnic.”

“The plain, simple fact is, it’s nice but we can’t afford it,” he said.

The House rejected, 220-203, a Democratic effort to push a bill similar to the Senate’s. The Senate reduced the bill’s cost to zero by balancing the new tax breaks with a ban on transactions corporations use solely to reduce their taxes but which have no apparent business purpose. Blunt said lawmakers have not yet scheduled a meeting to work on a compromise between the House and Senate bills, but he said he expected the bill will be completed and sent to the president later this year.

The House on Wednesday also passed a bill permanently banning taxes on Internet access.

The charitable giving bill changes the rules governing charitable foundations, which are required to donate 5 percent of their assets to charity each year. Some administrative expenses, including salaries over $100,000 and first-class airfare, would be excluded from the 5 percent gift calculation.