Lawmakers in the nation’s capital have proposed tax changes to encourage charitable giving and help victims of Hurricane Katrina get back on their feet.
The Senate’s top tax writers offered a package of tax aid that would let hurricane victims tap their retirement accounts without penalty. It also would assist businesses and encourage the donations of cash, food and school books.
Senators said the incentives, estimated roughly to reduce taxes by $5 billion to $7 billion, could pass quickly this week. It would be followed with provisions for health coverage for storm victims and, later, by tax incentives to rebuild battered towns and cities, they said.
“We need to get these tax incentives on the books and help Katrina victims make a fresh start,” said Senate Finance Committee Chairman Charles Grassley, R-Iowa.
“People just need cash,” said Sen. Max Baucus of Montana, the committee’s top Democrat.
House tax writers have also pledged to enact tax help quickly for individuals and families affected by the hurricane, and examine tax assistance for businesses, states and local governments working to rebuild and repair damaged property.
The Bush administration is looking into reducing tariffs on some building materials from Canada and Mexico if prices spike at home. Builders complain that these duties act as a tax on homeowners and businesses by driving up the cost of construction.
Treasury Secretary John Snow planned to meet with two Louisiana lawmakers on the tax writing Ways and Means Committees, one of many such meetings expected to discuss tax and economic issues spurred by Hurricane Katrina.
The Treasury Department already acted last week to spur investment in the region by opening a competitive tax credit program, the New Markets Tax Credit, to businesses and individuals looking to the regions hit by Katrina.
Among other actions, the administration set up a program that lets workers convert their unused vacation and sick days into cash donations and extended tax deadlines for individuals and businesses in the disaster zone.
Ideas for aiding families and businesses through tax incentives started to proliferate last week. The senators’ proposed package combines items aimed at victims, donors and businesses affected by Hurricane Katrina. Among other changes, it would:
• Waive a 10 percent penalty assessed on early withdrawals from employees’ retirement plans, like 401(k)s, recognizing that many families keep most of their savings in tax-advantaged retirement accounts.
• Waive laws requiring that taxes be paid on discharged debts, such as mortgages, when the debts are forgiven in response to Katrina damage.
• Allow businesses to use tax credits for hiring workers in Gulf Coast disaster zones and to offset salaries paid to workers through the end of the year.
• Give families who house evacuees an additional personal exemption worth $500 for each person to defray extra costs and encourage families to take in evacuees.
• Encourage businesses to donate food and school books by offering an enhanced deduction for those contributions.
• Suspend a law that allows for the deduction of casualty losses only to the extent the loss is greater than 10 percent of a taxpayer’s income.
• Increase the mileage rate for calculating charitable deductions to half that allowed for businesses deductions.
Copyright 2005 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Was this article valuable?
Here are more articles you may enjoy.