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Tax cuts approved to spur donations

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

The bill, passed 408-to-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.

The majority whip, Roy Blunt, Republican of Missouri, 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.

Representative Harold Ford, Democrat of Tennessee, 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 Representative Jerry Kleczka, Democrat of Wisconsin, calling himself "the skunk at the picnic."

The House voted 220-to-203 to reject an alternative Democratic bill, which would have 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. The House yesterday 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.

Other portions gradually increase tax-deductible donations for corporations from 10 percent of taxable income to 20 percent by 2012. Companies could also get tax breaks for donating food, scientific equipment, and computers.

Representative Mark Green, Republican of Wisconsin, praised language in the bill encouraging companies to increase their donations to religious organizations. He pointed to a study by the Capital Research Center, a group that argues the growth of government has eroded volunteerism, which said six of the 10 largest corporations ban or restrict contributions to faith-based organizations.

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