WASHINGTON – Hurricane Katrina (search) means long-planned Republican tax cuts will be delayed but not abandoned, giving Congress time to concentrate on post-Katrina recovery and reconstruction work, lawmakers say.
"We found that there's plenty of time to do everything that we want to do," House Majority Leader Tom DeLay (search), R-Texas, said Tuesday.
Republicans intend to follow a budget drafted earlier this year that would extend tax cuts that were set to expire, he said. Those extensions would add $70 billion to the deficit.
That tax package was to have been developed and debated this month under a schedule laid out in spring. Instead, it will be delayed by several weeks or a month to make room for Hurricane Katrina legislation, the chairmen of the House and Senate tax-writing committees said. A vote to repeal the estate tax has been shelved indefinitely.
Senate Finance Committee Chairman Charles Grassley (search), R-Iowa, said as many as 5 million taxpayers could get hit with higher taxes through the alternative minimum tax if lawmakers don't act this fall. The alternative minimum tax was invented to prevent wealthy individuals from dodging taxes, but inflation has extended its grasp into the middle class.
Grassley said the tax package is needed to prevent the capital gains and dividends tax rates from increasing in 2008.
"I would think in a time when we have some question about the ripple effect of what happened with Katrina affecting the whole economy of the United States, you don't want to do anything to discourage investment in America," he said.
Democrats have pushed the GOP to abandon its tax cuts while the federal treasury pours billions of dollars into the Gulf Coast for rescue and recovery, an effort that has already cost more than $62 billion.
"Get a better sense of Katrina costs, then we'll be in a better position to know what to do," said Sen. Max Baucus (search) of Montana, the top Democrat on the Senate Finance Committee.
Others said Katrina is the reason to keep pursuing tax cuts.
"At the very time you're trying to rebuild small businesses, you want to try and send a message to them that we don't care about them anymore?" said Sen. Jon Kyl (search), R-Ariz.
Tax writers have started working on tax changes aimed at immediately helping Hurricane Katrina evacuees and survivors, as well as charitable donors. They also plan to look at tax incentives to spur business investment and reconstruction in the Gulf Coast.
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