The approaching “fiscal cliff” of big budget cuts and big tax increases is already having a negative effect on the economy, U.S. Sen. Rob Portman (R., Ohio) said today.
In a telephone news conference with Ohio reporters, Mr. Portman said a lot of economic activity that normally would happen in 2013 is happening right now as investors try to avoid the impact of threatened tax increases.
The fiscal cliff refers to the $500 billion combination of tax hikes and spending cuts that will take effect starting Jan. 1 unless Congress approves a deal before then.
“You’ve also seen a lot of activity out there in the economy of people going ahead and whether it’s issuing dividends or taking capital gains now because they are worried about taxes going up next year. A lot of the analysis I’ve looked at, including [the Congressional Budget Office's] analysis and Federal Reserve [Board] and others, don’t take into account a lot of that behavior, sort of the transferring income to this year, which means it could be even worse than we’re projecting,” Mr. Portman said.
Senator Portman said the fiscal cliff should be used as a way to reform taxes and entitlements. By entitlement reform, he said he was referring to Medicare, which is government health care for seniors and people with disabilities, Medicaid, which is health care for the poor, and Social Security.
"I want to be sure that anything we do with this fiscal cliff does deal with pro-growth tax reform to get the economy moving and, second, does deal with our obvious fiscal crisis that’s at our doorstep, which is the unsustaintable growth on the mandatory side of spending," Mr. Portman said.
President Obama wants to raise tax rates on incomes over $250,000 a year while retaining the Bush-era tax cuts for incomes below $250,000 for a family.
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