Economy ‘frozen’ by lack of action on tax cuts, Grassley says

Sen. Chuck Grassley called for a two-year extension of the Bush-era tax cuts as soon as Congress convenes after the mid-term election.

“This economy is frozen and government is the main part of the reason it is frozen and this tax policy is one of the biggest reason it's frozen,” Grassley said.

Congress should have acted before recessing for the Nov. 2 election, Grassley, who is seeking re-election, said at Coe College in Cedar Rapids Oct. 21. The delay is “reckless and irresponsible,” the New Hartford Republican said.

“As a result, there's a possibility that every Iowan will have to pay higher taxes and some Iowans who don't have to pay taxes today will have to start paying them again,” according to Grassley, the ranking Republican on the Finance Committee, which writes tax policy.

His Democratic challenger, Roxanne Conlin of Des Moines, has called for extending the tax cuts for all but the wealthiest taxpayers. She's also labeled Grassley a “born-again debt and deficit reducer” after creating ushering in the Bush tax cuts of 2001 and 2003 “and recklessly voting for the $700 billion Wall Street bailout, with no strings attached, to the big bankers who drove our economy off a cliff.”

Campaign spokesman Sam Lozier said Conlin has always called for a continuation of the tax cuts - with one big exception.

“This is where Roxanne and Senator Grassley drastically disagree,” Lozier said. “Roxanne believes that we should end the tax cuts for the wealthiest billionaires and millionaires.  This impacts only 18,622 of the wealthiest Iowans and raises there taxes a meager 3 percent to 4 percent. Keeping this tax cut for the wealthy adds $770 billion to the deficit.”

There's more to it than whether the tax cuts for the wealthy should be continued, Grassley said. “Without action, a family of four with income of $50,000 and two kids will see an average tax increase of $2,100 in its tax bill next year,” he said.

If the tax cuts are not extended, seniors living off their savings will pay higher taxes, added Del Block, an Iowa Electric retiree, because taxes on dividends and capital gains will increase.

Cody Barker of Cedar Rapids, who previous worked as an intern in Grassley's office, said the loss of the tax credits for college tuition and interest on students loans could have a $1,500 impact on his family.

“That's a lot of lattes,” said the Brewed Awakenings barista who hopes to return to college next semester.

Inaction on the tax code has led to a great deal of uncertainty in the business community, Grassley said.

“Small business in particular, but even big business is very uncertain on what the federal government is going to do,” he said. “So they aren't hiring.”

Corporations are sitting on about $2.1 trillion in cash “and they aren't doing anything with it because they don't know what government is going to do,” Grassley said.

Dan Gee of Gee Asphalt Systems in Cedar Rapids is sitting on some cash, he said, because he's afraid to hire anyone or replace his aging equipment.

“I've hunkered down,” he said.

Taking the uncertainty out of the tax code is essential to getting Americans back to work, Grassley said.

“If we're going to get unemployment down from 9.6, we've got to let business know that the government's not going to screw around with this tax policy,” he said.