Deadlock could mean higher taxes: Geithner

Treasury Secretary Timothy Geithner
© AFP/File Jim Watson

WASHINGTON (AFP) – US businesses will be hit with higher tax bills if Republicans keep blocking the Obama administration’s economic recovery plan, Treasury Secretary Timothy Geithner warned Tuesday.

Stepping up pressure on White House foes in Congress, Geithner warned that Republican refusal to accept the administration’s economic proposals will lead to slower growth and exacerbate unemployment.

“The question before the nation is, will the Republicans in Congress embrace it or fight it? So far, they are fighting it,” he told an audience at an Intel semiconductor plant in Arizona.

“If Congress continues to fight the president’s plan, taxes will go up for all companies and all working Americans at the end of this year. Our decaying roads and bridges and airports will continue to be a drag on economic growth.”

“Local communities across the country will have to cut back more on education and lay off more first responders.”

“If Congress refuses to embrace sensible tax reforms to eliminate tax preferences for the wealthy, then we will not be able to make progress on the spending and entitlement reforms necessary to address our debt problems,” he added.

With a “super committee” of 12 Democratic and Republican senators tasked with finding $1.2 trillion in deficit savings by the end of November, President Barack Obama has pushed for a package of both budget cuts and tax hikes to meet the goal.

Obama’s proposals include expanding tax cuts for average income families, but raising them for the most wealthy, and removing tax “benefits” and loopholes for many businesses and industries.

But Republicans have steadfastly rejected tax increases in the deal, though they accept elimination of some tax benefits.

Politicians in both parties say the committee remains deadlocked less than three weeks before they have to produce a plan.

If they cannot reach a deal, or if they do and Congress will not accept it, the government is required to immediately slash $1.2 trillion from spending, which economists say could crunch the feeble economy back to recession.

Such an outcome could also result in the expiration of a package of “temporary” tax cuts made by the previous administration, adding to personal and corporate tax bills.