Tax breaks for Katrina victims could help the rich more than the poor
WASHINGTON – Tax breaks designed to help Hurricane Katrina victims get their hands on needed cash could do more for higher income survivors than for the neediest, a congressional report says.The Congressional Research Service, an office that provides lawmakers with nonpartisan legislative analysis, highlighted several items in tax bills that House and Senate tax writers reconciled Tuesday.The tax bill is one avenue lawmakers have pursued in sending relief to hurricane evacuees. Since Katrina hit the Gulf Coast in late August, Congress has also approved $62 billion in emergency spending and promised more.House and Senate lawmakers debated Tuesday whether some costs for cleaning up after Hurricane Katrina should be defrayed by cutting fat elsewhere in the federal budget.Lawmakers weighed the idea as President Bush made his fifth visit to the devastated Gulf Coast and received a briefing about Hurricane Rita, which lashed the Florida Keys and caused a flurry of storm preparations through the Gulf Coast to Texas. The Army Corps of Engineers raced to patch New Orleans’ damaged levee system ahead of the storm.Acting Federal Emergency Management Agency Director R. David Paulison told reporters Rita was expected to reach Category 3 or 4 levels. He said FEMA has aircraft and buses available to evacuate residents from areas the hurricane might hit.”I strongly urge Gulf coast residents to pay attention” to the storm, he said.House and Senate tax writers, meanwhile, agreed on a tax bill for Hurricane Katrina victims. It helps those victims access their savings by waiving penalties imposed for tapping retirement savings accounts before retirement. Other provisions let taxpayers write off more of their destroyed property and erase taxes regularly imposed when a debt, like a mortgage, is forgiven.Republican aides, speaking on condition of anonymity because a final agreement had not been announced, said the bill will include a two-year tax credit for businesses hiring people within the disaster area. Those who take in evacuees, other than family members, would be eligible for a $500 personal exemption.The Congressional Research Service report said some elements of the tax assistance would do more for wealthier taxpayers because many lower income individuals and families pay little tax, so efforts that lower their taxes may do little good. Lower income survivors are also less likely to have retirement accounts like 401(k)s and IRAs to tap into for recovery.However, the same tax measure includes assistance specifically for lower income families that would help the working poor hang onto their income tax credits, which can be disrupted by unemployment or family separation.Lawmakers moved ahead with the tax assistance while debating spending restraints. Senior Republicans, even those supporting tight reins on spending such as Senate Budget Committee Chairman Judd Gregg, R-N.H., said it could prove difficult to find budget cuts with the majority support necessary to succeed.”As many members of the Senate as there are, there’s that many different views of how you do offsets,” Gregg said. “That’s why it will be hard to do.”One example is the upcoming rollout of the new Medicare prescription drug benefit, passed two years ago. Some conservative lawmakers have suggested delaying it to buffer Katrina’s effect on the budget.”It’s a nonstarter,” said House Majority Leader Tom DeLay, R-Texas.White House budget director Joshua Bolten briefed senators on Katrina response efforts. He renewed the office’s commitment to a plan by congressional Republicans to curb growth in federal benefit programs like Medicaid by $35 billion.House Democratic leaders called for an independent panel to oversee the awarding of Katrina contracts for hurricane cleanup, citing a need to ensure taxpayer dollars are doled out fairly.The House, meanwhile, debated legislation giving the Labor Department greater leeway in running a jobs program for people affected by national emergencies.The bill would expand the National Emergency Grant program under which the Labor Department has already awarded $191 million to support 40,000 temporary jobs for those displaced by Katrina. The program provides up to six months of job training or work related to assisting victims.The bill, sponsored by Rep. Charles Boustany, R-La., would extend the program to areas outside the immediate disaster area to help people who relocated elsewhere.The House also approved, by voice vote, legislation to extend for two years a program through which the secretary of education can waive student loan payments for reservists or National Guard members called to active duty.Vail, Colorado
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