Dismay Over Tax Bill

Jewish charitable organizations are not going to get the help they were hoping for in the new tax bill, since the final version leaves out a proposal that might have boosted giving by billions of dollars.

The bill, signed by President Bush on June 6, grabbed headlines for its tax cuts and $1.35-trillion figure. But Jewish groups were surprised and dismayed that a plan to let people who do not itemize their tax returns deduct their charitable contributions was left out in last-minute negotiations.

“To say that we are disappointed is probably an understatement,” said Diana Aviv, vice president of public policy for United Jewish Communities, the Jewish community’s central fundraising and social services agency. “We thought the issue was dear to the president’s heart,” she added.

The White House’s larger faith-based initiative has always included a plan to expand the federal charitable deduction to 80 million non-itemizers.

In a speech on May 20, Bush was still touting that plan. “Everyone in America — whether they are well off or not — should have the same incentive and reward for giving,” Bush said.

But administration officials negotiating with Congress over the tax bill did not make the non-itemizing provision a priority as they fought for other parts of the bill: for example, reductions in the tax rate and marriage penalty and elimination of the estate tax.

The non-itemizing provision, it was thought, would have potentially encouraged almost $15 billion a year in new charitable giving. It is unclear how much Jewish charities would have benefited.

The White House says the president hopes the provision will function as part of the larger faith-based initiative, which is still in its working stages. An official at the Office of Faith-Based and Community Initiatives said the non-itemizing plan was, in fact, never intended to be included in the tax bill.

But Jewish groups, which had universally supported the provision, see the failure to include it in the tax bill as the probable end of the idea. “The tax bill is where you do tax policy,” said Hannah Rosenthal, executive director of the Jewish Council for Public Affairs.

Rosenthal said the provision could have been used to reach out to younger people, to get more non-givers to participate, and to change the culture of charitable giving in the country.

One issue of particular interest to the Jewish community that did make it into the tax bill was the expansion of education IRAs, or education savings accounts. For the first time, parents will be allowed to use the tax benefit of the savings account toward tuition at private and parochial elementary and secondary schools. Orthodox groups, in line with the White House, say the education savings accounts expand parental choice.

Other Jewish groups, such as the Religion Action Center for Reform Judaism, have opposed the accounts, not as a church-state issue but a public-policy one, saying the accounts siphon off money from the public school system.

Those Jewish groups opposed to the education IRAs did not make too much noise about its inclusion in the tax bill. A number of the groups had focused on what they see as the larger threat, direct government support for private schools, and so fought against the use of vouchers.

Vouchers were ultimately blocked in the education bill in the U.S. House of Representatives, and they are not thought to have much chance of passage in the Senate.

Opponents of the education savings accounts say lower-income families without thousands in savings cannot take advantage of the benefit, and those that can will find the annual benefit is nominal.

“Every little bit helps,” countered Abba Cohen, director and counsel of the Washington office of Agudath Israel of America, a fervently Orthodox group. He said that the accounts are not a government subsidy and that the Jewish community has to pursue every avenue to help parents who send their children to Jewish day schools.