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 Thursday.
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 effects of threatened tax increases.
The fiscal cliff refers to the combination of tax increases and spending cuts that will take effect Jan. 1 unless Congress approves a deficit-reduction 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,” Mr. Portman said.
Even if a deal is reached and the fiscal cliff is avoided, the first quarter economy will still be weak, he said, because of “a lot of economic activity pushed into this quarter because of fear of going over the cliff.”
Mr. Portman said the fiscal crisis should be used to reform taxes and Medicare, Medicaid, and Social Security.
Mr. Portman said he had endorsed a plan advanced by U.S. Sen. Pat Toomey (R., Pa.), introduced by the Super Committee in 2011, which involved Medicare and Medicaid entitlement reform, along with new revenue from upper bracket taxpayers through tax reform, and further spending cuts.
“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 unsustainable growth on the mandatory side of spending,” Mr. Portman said.
“I don’t believe it’s smart to raises taxes right now, particularly the way the President wants to do it, which is on top of a terribly inefficient and antiquated tax system. I would much rather see us make a decision now to pursue pro-growth tax reform to get this economy moving, and in doing so we will kick off additional revenue, I’m convinced of it,” he said.
President Obama wants to raise tax rates on incomes over $250,000 a year while retaining the Bush-era tax cuts for household incomes below $250,000.
More than $500 billion in automatic tax increases and spending cuts are set to take effect in January.
The White House predicts the increase would cause the tax bill on an Ohio family of four earning $72,800 to go up by $2,200, but that 99 percent of Ohio families who earn less than $250,000 a year would not see an income tax increase under the President’s plan.
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