Fiscal Cliff worries local and state officials


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Every day closer to 2013, is another inch closer to the Congress toppling over the so-called fiscal cliff.

At the end of the year, the Bush-era tax cuts will expire along with various other pieces of legislation that will impact Iowa’s economy, including the farm bill and wind-energy tax credit. This is what has been popularly referred to as a “fiscal cliff.”

“It just stands to reason that raising taxes is the worst thing that can happen right now,” said Patrick Barron, a University of Iowa adjunct lecturer in economics.

Barron said allowing the Bush-era tax cuts to expire — which will happen if Congress doesn’t reach a budget agreement by the end of the year — would hurt Iowa’s economy by decreasing the amount of money in Iowans’ pockets, preventing them from spending and saving more.

Sen. Chuck Grassley, R-Iowa, said in an email statement to the The Daily Iowan that he is very concerned about what a tax increase would do to Iowans.

According to a release from the House Committee on Ways and Means, the average family of four would see a nearly $2,200 increase in taxes.

“The effects of repealing the 2001 and 2003 tax relief would be significant for Iowans and the state’s economy,” Grassley said. “The expiration of all of these tax measures would cause hardship for Iowans and hurt the economy as it continues to struggle.  For the sake of economic growth, the government needs to get spending under control rather than raise taxes across the board.”

As of October, Iowa’s unemployment rate sits at 5.1 percent, 2.8 percentage points under than the national rate in October. Iowa’s slightly better economic situation does give some officials hope.

Rep. Dave Jacoby, D-Coralville, said while he believes the expiration of the tax cuts will be damaging to the national economy, he has faith in the strength of Iowa’s economy to weather the situation.

Jacoby said he thinks the Iowa economy is continuously growing and remains strong. He said the cuts should be extended nevertheless and that he is frustrated with Congress’s failure to listen to the voters.

“We’re exactly one month out of the election, and it’s almost like everyone in Washington forgot what the voters said,” he said. “Talk about short-term memory. They said get something done. No one wants to go over the fiscal cliff.”

Barron said despite Iowa’s economy being on the upswing, there is no way the state could escape the damage a tax increase would do to the national economy.

“Iowa is an [export] state,” he said. “We are in effect making things and selling things to the rest of the world, and if the rest of the world doesn’t have the money to buy our things, I don’t see how Iowa can be insulated to the effects of the tax increase.”

Timothy Hagle, UI associate professor of political science, said whether to raise taxes on the wealthy is the sticking point between the two parties holding up negotiations. Republicans regard the wealthiest Americans as job creators, he said.

“They may not expand their business,” he said, if taxes go up. “They may not hire that extra person.”

Sen. Tom Harkin, D-Iowa, strongly blamed on Republican leadership in the House for the holdup on the extension of Bush-era tax cuts for middle class families.

“There’s great concern about this so called fiscal cliff. Well, let’s get rid of a huge piece of that threat by extending middle-class tax cuts right now,” he said in a statement.

Harkin said in July the Senate passed the Middle Class Tax Cut Act to ensure tax relief for middle class families.

“But House Republicans refuse to even bring this bill to the floor for a vote, insisting that we first agree to extend the tax cuts for the top 2 percent,” he said. “In other words, they’re determined to hold 98 percent of Americans hostage to their demand for tax cuts for the super wealthy.”

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