Contact: Antonia Ferrier (202) 224-5344
Thursday, September 29, 2005

WASHINGTON, D.C. - U.S. Senator Olympia J. Snowe (R-ME) today participated in a Senate Finance Committee hearing on Hurricane Katrina and the Community Rebuilding Needs and the Effectiveness of Past Tax Proposals. Governors Haley Barbour (R-MS), Kathleen Blanco (D-LA), and Bob Riley (R-AL) testified before the Committee.

Snowe released the following statement today:

Thank you, Mr. Chairman, for holding this critical hearing to examine the rebuilding needs of areas devastated by Hurricane Katrina and to analyze the tax incentives Congress can enact to assist in what will be a long and challenging rebuilding effort.

At the outset, let me say that having visited the Gulf last week, it is critical that we do all we can to help in the rebuilding effort. A week ago Monday, I toured the region from both the air and on the ground, and witnessed firsthand the devastation that has been left behind – house after house, business after business, ravaged and destroyed by the cruelties of wind and water. The damage wrought by Hurricane Katrina will linger long after the floodwaters recede, electricity is restored, and the levees are patched. Let me say unequivocally that it is our unshakable responsibility to bring the full resources of the federal government to bear in repairing the damage as expeditiously as possible.

Indeed, the challenges facing us are daunting and unprecedented. It is now estimated that the disaster has affected over 800,000 firms. Employment in Louisiana, Mississippi, and Alabama may be reduced by over one million jobs. And economists project that Hurricane Katrina could reduce second-half economic growth by as much as a full percentage point.

I think it is appropriate to examine tax incentives to expedite the rebuilding process. It is also crucial to recognize the needs of small business and that tax incentives for small business are vital to spur reconstruction of the Gulf. In looking to build the Gulf anew, we cannot ignore that it is America's 25 million small businesses that create three quarters of all new jobs, and grow at twice the rate of all firms. Indeed, if one combined all the output of small businesses, they would comprise the third largest economy in the world after the United States as a whole and Japan. Clearly, once again, it will be our small businesses and entrepreneurs who will lead the way through these challenging times with their determination, innovation, and unflagging spirit.

Turning to what we can do, I have long championed the ability of small businesses to expense certain investments in business assets and was successful last year in securing a two-year extension of the $100,000 expensing limit under section 179. This simple provision has proven to be a very effective tool in spurring business investment and creating jobs.

We should, as President Bush has recommended in his Gulf Opportunity Zone proposal, double small business expensing from $100,000 to $200,000 for small businesses in the Hurricane Zone. This will enable small business owners to have the resources they need to purchase the items necessary to get up and moving quickly. With plant and equipment in place, small businesses can once again begin to deliver goods and services, and new workers can be hired as the Gulf economy gains traction.

In addition to enhancing the expensing of new investment, we should also look at reducing to five years the depreciable life of leasehold and restaurant improvements. Congress last year reduced the depreciable life of such investments to 15 years nationwide. But we need to go further than that in the Hurricane Zone, so small businesses have the cash flow they need to invest in their facilities. This incentive is a true job creator on two fronts: it will both help spur the construction industry and allow employees to return to work at rebuilt businesses.

Third, this Committee should give strong consideration to a proposal that would exempt from tax disaster relief payments paid to a small business. Small businesses should not have to pay tax on amounts they receive to repair or rehabilitate their facilities or the contents of those facilities as long as those expenses were not insured. Under current law, such payments accrue tax free to individuals and they should do so for small businesses as well.

Finally, Mr. Chairman, I would like us to consider tax credits to rebuild the housing stock and provide housing for families and individuals. Not only would this incentive help to meet the immediate need of putting roofs over people's heads, but it would also put people back to work. This incentive could work in conjunction with the existing Low-Income Housing Tax Credit, for example.

I look forward to the testimony from our distinguished group of witnesses. I recognize that the proposals I have outlined are just the tip of the iceberg and a starting point. I would like to emphasize that I am open to considering any good ideas that will help the Gulf region get quickly on its feet. Thank you.

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