Bill to Coax Businesses Back to Gulf Coast Stalls in Senate

WASHINGTON – Lawmakers promised the Gulf Coast some tax breaks to entice businesses back after Hurricane Katrina (search), but the incentives have stalled as senators press for more.

The top Democrat on the Senate Finance Committee wants to include an expansion of tax credits and refunds for parents and the working poor to help alleviate the poverty exposed by the storm.

"There's a business side, for one thing, but there's also a personal side, which I think has to be addressed," Sen. Max Baucus (search), D-Mont., told reporters Wednesday.

A Republican senator from Mississippi is seeking to coax businesses to the region by eliminating capital gains taxes for investments along the flood stricken coast.

"How do we get business and industry to look at the area as a place of business?" asked Sen. Trent Lott (search).

Looking for consensus, the chairman of the Senate committee in charge of writing the bill said that Republicans cannot persuade Democrats to accept a capital gains tax break and that Democrats should hold back for now on expanding tax credits.

"They just don't belong in that bill," said GOP Sen. Charles Grassley of Iowa, the Senate Finance Committee chairman.

Almost two months after the storm, people want to see senators stop talking and get something moving, said Sen. Mary Landrieu, D-La.

"It shouldn't be used by either side to promote a tax policy agenda," Landrieu said. "Everything for Katrina is coming more slowly than expected. It's because the administration is still yet to grasp the dimensions and scope of the devastation."

House and Senate tax writers are assembling separate but similar measures to assist businesses rebuilding in the region and to encourage companies to stay while roads, schools and levees are rebuilt.

Plans include increasing the amount of equipment investments that companies, including small businesses, can write off and giving business assistance with the cost of cleanup and demolition.

Tax writers want to help businesses get cash into companies' hands by applying some of the incentives against taxes already paid in past years, generating tax refunds.

Tax writers also have talked about using private activity bonds to get capital flowing into the region and incentives to help rebuild housing for low- and moderate-income residents.

Baucus wants to find a place in the legislation for an expanded earned income tax credit and child tax credit. The senator pointed to President Bush's statement to "confront this poverty with bold action" during a speech in New Orleans' Jackson Square.

Baucus would give families with three or more children a slightly larger earned income tax credit and remove more of the "marriage penalty" built into the credit.

He would lower the income threshold at which families become eligible for the child tax credit. Without a change, families working full time and making minimum wage could lose the benefit as inflation pushes the credit's eligibility threshold up.

Lott said he would like to see tax breaks that encourage businesses to relocate into the Gulf Coast and aid in reforestation of the area wiped clean by the storm. He also is supporting the capital gains tax break.

"We're careful about it. We're going to have to justify all of them," Lott said.

The chairman of the House Ways and Means Committee, Rep. Bill Thomas, R-Calif., said his plan would advance soon. "We hope that the Senate does not unduly restrain the packages that we put together because they desire more," he said.

The tax breaks he is promoting would provide no more than $10 billion and will use mechanisms already in tax laws, with changes that focus tax benefits in the hurricane zone, Thomas said. That does not include eliminating capital gains taxes on investments in the region. He said that idea was an "extreme change in the law."