Ohioans have been hearing about the fiscal cliff a lot lately. The cliff applies to a January 1st deadline when the law, enacted by a bipartisan majority of both houses of Congress, requires a mix of spending cuts and tax increases. This sudden dose of austerity will put us on a long-term path to budget stability, but it will also send our nation into a recession for the better part of next year. Fortunately, there is an alternative.
We can reduce our nations deficit and avoid onerous tax increases on middle class Americans. Last July, the Senate voted to extend tax cuts for 99 percent of Ohioansthe working families and the middle class tax payers who need relief the most. Yet today, this bill that ends tax cuts for Americans making over $250,000 still languishes in the House of Representatives.
Middle class Ohioans have always worked hard and played by the rulesnow its time that the wealthiest Americans paid their fair share too. That means its also time for the House of Representatives to act.
The Middle Class Tax Cut Act would extend middle class tax cuts for the 99 percent of Ohio families, and all Americans making less than $250,000 per year. Under the bill, Ohio households would save an average of $1,400 on their taxes each year.
The legislation would also extend other tax provisions critical to the middle class the American Opportunity Tax Credit which helps middle-class families afford college; the Child Tax Credit as it was expanded by the Bush Administration; and the Earned Income Tax Credit (EITC), which is a refundable credit that rewards work and offers assistance to working individuals and families who earned less than $49,078 in 2011. These programs have historically had considerable bipartisan support. In fact, President Reagan called the EITC the best antipoverty, the best pro-family, the best job creation measure to come out of Congress.
According to a report released last week, failing to extend these middle class tax cuts will have a considerable impact on Ohio families. In fact, without the extension, a middle-income Ohio family of four (earning $72,800) could see its income taxes rise by $2,200.
Raising taxes on middle class families wont just hurt individual households; it will also set back our economy and harm job creation. Imposing higher taxes on middle class families, during these challenging economic times, means that Ohioans will spend less at Ohio retailers, an industry that employs more than 563,000 people in our state. A sharp rise in middle class taxes could also slow economic growth by 1.7 percent in Ohio.
In addition to passing the Middle Class Tax Cut Act, we need to take bold but targeted steps to reduce the deficit. While some of my colleagues want to balance the budget by cutting Medicare or raising the retirement age for Social Security, I believe there are important steps we can take to reduce the deficit and strengthen our economy.
First, we can cut $20 billion in spending by ending taxpayer-funded subsidies for the five biggest oil companies which made a record $137 billion in profits last year while taxpayers spent billions giving handouts to these mega corporations. Thats why Im fighting to pass the Close Big Oil Tax Loopholes Act, which would end tax subsidies for big oil companies that are reaping profits while you pay more at the pump.
Next, we can pass the Offshoring Prevention Act a bill that closes a costly tax loophole that rewards companies for moving factories overseas saving $19.5 billion while increasing employment in the United States.
Third, we can save $2.3 billion over the years by allowing timely access to generic prescription drugs. Generic versions of biologic drugsthe most expensive subset of drugs on the marketarent available until at least 12 years after the patent for a brand-name drug is issued. By shortening this window consumers, and the government, can spend less on drug costs.
We can also cut $20 billion in spending over the next decade by streamlining the farm safety net. I helped write, and the Senate passed, a bipartisan measure that would consolidate farm programs, saving more than $20 billion. Again, the House of Representatives has failed to consider this money-saving legislation.
Finally, we can save $23 billion over ten years by ending special tax breaks for Wall Street hedge fund managers. These wealthy hedge fund managers can make more than $2 billion each year, yet pay a lower tax rate than most middle class Ohioans because of a special tax break. If hedge fund managers paid the regular income tax rate, we could reduce the deficit by $23 billion over the next decade.
Deficit reduction will require sacrifice, but that sacrifice must be shared rather than placed squarely on the backs of seniors and middle class Ohio families. The government must work together and take a balanced approach to deficit reduction.