PERSPECTIVE ON EARTHQUAKE RELIEF : A Way to Help Victims Help Themselves : Granting a full federal tax deduction for casualty losses is fair, given the impossibility of full insurance coverage.

They are the forgotten quake victims, in danger of falling (literally) through the cracks. They live in homes with broken water heaters, shattered televisions, collapsed chimneys and cracked walls, repairs for which will run into the thousands of dollars. They don’t qualify for housing assistance, but they need assistance with their housing. They are taxpayers for whom the only federal relief is a loan from Washington--that is, they can borrow back (with interest) some of their past tax contributions.

The time has come for the federal government to help these disaster victims help themselves--without red tape, lines or handouts--by allowing them to deduct the full amount of their losses from their taxes. Under Section 165 of the Internal Revenue Code, you can deduct only that portion of your loss above 10% of your gross adjusted income, plus another $100. For example, someone with a $40,000 adjusted gross income cannot deduct the first $4,100 of damage; someone earning $80,000 cannot deduct the first $8,100 in damage. In other words, a large number of needy quake victims cannot recover a penny. Yet, according to a Los Angeles Times poll, 42% of those within five miles of the quake’s epicenter reported cracked walls, shattered windows or worse. And 25% estimated damages of at least $5,000.

The elimination of this unreasonably high obstacle to deducting losses makes particular sense for quake victims: They cannot easily insure against limited (but expensive) losses, because earthquake insurance, unlike that for many other types of natural disasters--fire, flood and wind--has very high deductibles, often 10% of a policy’s value. Combined with the unreasonably high 10% restriction on tax deductions, many quake victims are left between a rock and a hard place.

Just what are the objections to offering some tax relief?

* If the restriction is lifted for earthquake victims, it will have to be lifted for any victim of a natural disaster. The simplest answer to this objection is perhaps that it should be. However, it need not. Congress could eliminate the restriction only for those disasters eligible for federal disaster relief assistance. Or, the restriction on deductions could be lifted for those disasters, like quakes, where high insurance deductibles make it more difficult to insure fully against losses.

* Granting a full deduction for quake victims would cost the federal government too much money. For at least the past five years, California taxpayers have paid more to the federal government than the state receives back. In that light, it is not too much to ask that the federal government allow California quake victims to keep more of their earnings in their hour of need. Certainly, federal assistance to those who suffer a natural disaster is one of government’s more legitimate functions. Besides, federal concerns over cost would be more persuasive if federal funds weren’t presently being wasted. But the commendably prompt federal earthquake assistance has been afflicted with fraud in the distribution of food stamps and housing vouchers. A tax deduction, at least, allows legitimate victims to take prompt action while granting the government time to verify eligibility, as it does with any deduction.

* A full deduction benefits those in higher tax brackets more than those in lower tax brackets. However, that is true of all deductions. Taxpayers in higher brackets benefit more from deductions because they pay a larger percentage of their income in taxes. This objection, taken to its logical conclusion, would argue against any deductions (including the home mortgage interest deduction) because those in higher brackets always benefit more. Have we really reached the point where we will object to any policy that assists the very taxpayers whose taxes support the government’s largess?

Those who support lifting the unduly high 10% restriction on deductions for quake losses should write the President, our senators and representatives. Let our elected officials know that how they treat us on April 15 will influence how we treat them on Nov. 8. As Winston Churchill observed, democracy is not a spectator sport.