Geithner says Treasury cannot delay tax hikes

WASHINGTON Fri Nov 16, 2012 6:21pm EST

Treasury Secretary Timothy Geithner speaks at the Institute of International Finance (IIF)'s annual meeting in Tokyo October 11, 2012. REUTERS/Yuriko Nakao

Treasury Secretary Timothy Geithner speaks at the Institute of International Finance (IIF)'s annual meeting in Tokyo October 11, 2012.

Credit: Reuters/Yuriko Nakao

WASHINGTON (Reuters) - The Treasury Department does not have the authority to delay the tax increases that will take effect at the end of the year if the White House and Congress are unable to stave off the "fiscal cliff," Treasury Secretary Timothy Geithner said on Friday.

The law "does not give me the authority to give them, to let them avoid making some decisions on rates and policy," Geithner said on Bloomberg TV's "Political Capital with Al Hunt," when asked whether he could freeze the income tax withholding rates if Washington was close to averting the year-end fiscal crisis.

Some $600 billion in spending cuts and tax hikes will start taking effect December 31 -- a combination of austerity measures known as the "fiscal cliff" that could tip the country into recession if lawmakers fail to act.

Some analysts believe the Treasury has discretion to hold back issuing new tax withholding tables if it believes a deal stopping tax changes is in the offing.

But Geithner said: "Don't look to that as a solution to this problem."

Two years ago, the nation was gripped by a similar situation, with a down-to-the-wire congressional fight over extension of the Bush-era tax rates for the wealthy. A deal was not reached until mid-December.

The Obama administration has just over six weeks to broker a deal with Congress to avoid the fiscal cliff and is pushing Republican lawmakers to allow the tax cuts for the wealthiest to expire.

Earlier on Friday, Geithner and President Barack Obama started negotiations with Congressional leaders on what appeared to be a promising note.

"You heard each of the leaders say coming out that it was a very constructive meeting," said Geithner.

"They said what you'd hope for them to say at this point, which is that 'this is something we can do, we're committed to do it, we want to do it as soon as we can, we know the stakes are very high,'" he said.

As part of the negotiations, the administration is using its most recent budget proposal as its deficit reduction plan, which includes raising more than $1.5 trillion in new revenue over the next 10 years.

The massive spending cuts and tax hikes will coincide with when the country is expected to hit the debt ceiling, or the legal amount it is allowed to borrow.

Geithner is expected to remain as Obama's Treasury chief through mid-January. When asked whether he would stay until the administration cut a deficit reduction deal, Geithner said: "I'm very confident that we're going to get enough done in these next few weeks and that (Obama's) going to have a successor in place so I'll be able to go off and do some other things."

(Reporting by Rachelle Younglai, Kim Dixon; Editing by Leslie Adler and Dan Grebler)

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/
Comments (2)
Harry079 wrote:
“when asked whether he could freeze the income tax withholding rates”

What INCOME TAX holding rate you talking about?

You must mean the 2% temporary reduction in the masses SOCIAL SECURITY contribution that is normaly 6%. That 1/3 reduction that could cost many people a smaller monthly check when they retire because of the lesser amount paid in. THAT income tax holding rate?

Nov 16, 2012 6:51pm EST  --  Report as abuse
Yamayoko wrote:
Why didn’t Geithner say “Treasury does not have authority to delay waterfalling-spending cuts” ?

Nov 16, 2012 10:34pm EST  --  Report as abuse
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

Recommended Newsletters

Reuters U.S. Top News
A quick-fix on the day's news published with Reuters videos and award-winning news photography and delivered at your choice of one of four times during the day.
Reuters Deals Today
The latest Reuters articles on M&A, IPOs, private equity, hedge funds and regulatory updates delivered to your inbox each day.
Reuters Technology Report
Your daily briefing on the latest tech developments from around the world from Reuters expert tech correspondents.