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Thursday, October 06, 2005

Usefulness of Tax Breaks For Katrina Relief Questioned

A week after a hearing of the Senate Finance committee cast doubt on the usefulness of tax cuts in relief efforts to help individuals and businesses on the Gulf Coast, additional economists and expert analysts have supported that position. The New York Times reported this morning that economists from the very conservative Heritage Foundation to the more centrist Tax Policy Center have confirmed that President Bush's tax incentive proposal will do less for individuals who live in the affected areas and more for rich investors and businesses from other parts of the country. The Times article quoted William Beach, chief economist at the Heritage Foundation as saying, "People in the area obviously won't have tax liabilities for some time. What we're talking about is getting very wealthy people from around the United States to invest in New Orleans."

In addition to growing concensus among private economists that tax cuts are not the best option for relief and reconstruction efforts in the Gulf Coast, the highly respected Congressional Research Service released a report last week that found little evidence of the positive impact of tax incentives such as the "opportunity zones" proposed by President Bush in growth and employment in those areas. Nonetheless, Congress continues to explore writing yet another tax cut bill under the guise of "Katrina relief." Treasury Secretary John Snow was the lead witness today at another Senate Finance Committee hearing to promote the president's tax proposals for reconstruction of the Gulf Coast and spent most of his time defending the proposals against attacks from skeptical Senators.