The latest update on the on-going toxic Chinese drywall story is that the IRS is seriously considering allowing homeowners whose houses have been severely damaged to take a deduction on their federal income tax relating to economic injury they have suffered at the hands of this dangerous and destructive product.    In a recent letter to Senator Jim Webb (D-VA), one of several Senators to request such a deduction for affected homeowners, the IRS noted that if the Environmental Protection Agency and Consumer Product Safety Commission determine that these homes have suffered “extreme and unusual damage,” they could be given a deduction that would equal the drop in value of their home caused by the contaminated Chinese wall board.      Although EPA and CPSC are still investigating, all indications are that they will reach the same conclusions that homeowners and builders have – that the toxic drywall has completely ruined thousands of homes costing millions of dollars in damages.  The IRS would allow this deduction – which could equal tens of thousands of dollars per homeowners – under its “casualty loss deduction” usually granted in the aftermath of natural disasters such as hurricanes and tornadoes.  This deduction would kick in if insurance does not cover the damage or cost of repairs, and would not include expenses for alternate housing or medical care.   As many as 100,000 homes in 21 states are affected by this drywall, which smells like rotten eggs, emits toxic chemicals, and corrodes everything from picture frames to electrical wiring to refrigerators.  It has also had a significant impact on the health of homeowners, causing a variety of symptoms including respiratory problems, rashes and gastrointestinal difficulties.    The probability of an IRS deduction may be high, but the spirits of displaced families remains low.  Many are living in temporary housing or with friends or family and no deduction can completely replace what they have lost.   So far China’s response to this crisis has been along the lines of “yeah, whatever” and no funds are forthcoming from the Dragon to assist the homeowners its drywall industry has irretrievably harmed.     There is no question that these homeowners deserve relief from the same government that failed them by allowing a toxic product onto our shores, but it is important to note that this cost is also borne by all taxpayers, as China is providing no financial relief for their part in causing this problem   This is why trade cases brought against China that include consumer safety complaints are vitally important.    Significant and serious action by the US government against dangerous Chinese imports is currently the best avenue we have to halt the import of these products onto our shores.   We need to do more of it.  Yesterday.