Jonathan Tamari, Inquirer Washington Bureau
Posted: Tuesday, November 27, 2012, 3:01 AMWASHINGTON - In case anyone missed it, President Obama and his allies had a reminder for lawmakers returning to work Monday: the fiscal cliff is coming, and it will take a massive bite out of the middle class unless a deal is reached by Dec. 31.
The message was delivered anew by a White House report showing that looming tax hikes could cost middle-income families $2,200 and take a $200 billion chunk out of consumer spending, slowing economic growth. That warning will likely be amplified by Sen. Bob Casey (D., Pa.), who announced a forthcoming hearing on the fiscal cliff's impact on businesses and the middle class.Combined, the report and Casey's announcement appeared aimed at amplifying pressure on Republicans to compromise on Obama's call to extend tax cuts for families making $250,000 or less, averting much of the impending tax pain for 98 percent of Americans. The move would also make it easier to increase rates on wealthier Americans, as Obama promised in his campaign.
"I would hope that Republicans would come together with us and say, 'Let's vote on what we agree on and let's vote to make sure that middle class families have their tax cuts in place,'" Casey said in an interview, echoing comments made by Obama and other Democrats, including Philadelphia Mayor Nutter.
Casey also called for extending an expiring payroll-tax cut, a provision that has garnered little attention but that could also affect take-home pay.
Republicans have resisted Obama's tax plan, saying that while they are open to raising revenues by closing loopholes or capping deductions, rate increases would harm the economy. GOP leaders want to extend existing tax rates for all incomes. Sen. Pat Toomey (R., Pa.) has issued a report saying that raising rates would cost 31,000 jobs in Pennsylvania.
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A middle-class family of four could face a $2,200 tax hike if Congress doesn't avert the hikes looming at year's end, the report said. That would translate into less spending on dining out, cars, and household items, said the report by Obama's National Economic Council and Council of Economic Advisers.
Middle-class spending "is the pillar that holds up the U.S. economy," said Alan Krueger, chairman of Council of Economic Advisers.
The study looked at the effect of allowing income tax rates to rise on incomes of $250,000 and less, and of a failure to fix the Alternative Minimum Tax so that its reach doesn't expand by millions of taxpayers.
It did not factor in the expiring payroll-tax cut, which dropped the tax from 6.2 percent to 4.2 percent. Many in Washington expect that break to vanish at year's end, but Casey said it should continue because it puts money back into paychecks and encourages consumer spending. "It's not the only factor but I think it's a substantial factor in getting monthly job growth," he said.
The expiring break would affect nearly 77 percent of tax filers and cost an average of $721 in 2013, the nonpartisan Tax Policy Center said.
Casey, chairman of Congress' Joint Economic Committee, scheduled a Dec. 6 hearing on the potential impact of the tax hikes and spending cuts known together as the fiscal cliff. The hearing will also serve to ratchet up scrutiny of the negotiations grinding back to life this week.
Contact staff writer Jonathan Tamari at jtamari@phillynews.com. Read his blog 'CapitolInq' at www.philly.com/CapitolInq.
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