Tax Breaks Proposed for Storm Victims

House and Senate tax writers agreed Tuesday on a package of tax breaks designed to help Hurricane Katrina victims recoup their losses and get needed cash.

The tax bill is one avenue lawmakers have pursued in providing relief to hurricane evacuees. Since Katrina hit the Gulf Coast in late August, Congress has approved $62 billion in emergency spending and promised more.

House and Senate lawmakers debated Tuesday whether some costs for cleaning up after Katrina should be defrayed by cutting funds elsewhere in the budget.

Congressional tax writers agreed on a bill that would help Katrina victims access their savings by waiving penalties imposed for tapping retirement accounts before retirement. Other provisions would let taxpayers write off more of their destroyed property and erase taxes normally imposed when a debt, such as a mortgage, is forgiven.

The bill, which lawmakers expect to pass quickly, includes a two-year tax credit for businesses that hire people within the disaster area. Those who take in evacuees other than family members would be eligible for a $500 personal exemption.

A Congressional Research Service report said some elements of the tax assistance would do more for wealthier taxpayers because many lower-income people and families pay little tax. Lower-income survivors are also less likely to have retirement accounts such as 401(k)s.

However, the same tax measure includes assistance for lower-income families that would help the working poor hang on to their income tax credits, which can be disrupted by unemployment or family separation.

The House, meanwhile, voted 400 to 0 to give the Labor Department greater leeway in running a jobs program for people affected by national emergencies.

The House also approved, by voice vote, a two-year extension of a program that allows the secretary of Education to waive student loan payments for reservists or National Guard members called to active duty.