White House Warns Tax Hike Will Curb Consumer Spending
(WASHINGTON) -- An Obama administration report out Monday says the typical American household will pay $2,200 in additional taxes next year if the so called Bush-era tax cuts for the middle class are allowed to expire.
The findings from the President’s Council of Economic Advisers also states that the net result would be a slowdown in consumer spending by $200 billion in 2013, stunting the economic recovery by 1.4 percent. A decline of $200 billion in consumer spending is roughly equivalent to four times the amount spent by Black Friday shoppers last year, the report said, or the entire sum of domestic auto sales.
The White House’s findings are a clear grab for leverage in the impending “fiscal cliff” talks on Capitol Hill, in which the previous administration’s cuts have been a negotiating point. But it also largely echoes similar research from the non-partisan Congressional Budget Office out earlier this month. Economists warn the automatic spending cuts and tax increases that would be triggered if Congress fails to pass a budget by the end of the year would plunge the country back into recession.
President Obama and congressional Democrats have taken the position of continuing the cuts for households making under $250,000 a year, while allowing those same breaks to expire for higher income earners. The Republican caucus has largely fought to keep those cuts in place across the board, but since this weekend, several key members of the GOP signaled they were open to breaking a long-standing pledge not to raise taxes.
“The only pledge we should be making to each other is to avoid becoming Greece. And Republicans should put revenue on the table,” Sen. Lindsey Graham, S.C.-R, said on ABC’s This Week Sunday.
If negotiations are successful, the report claims the economy could still see an immediate negative impact: Uncertainty over possible future tax hikes on the middle class could lead to a slowdown in holiday shopping, stunting the economic recovery.
The White House report hits as millions of Americans turn to “Cyber Monday” for online holiday shopping deals, and coincidentally as Congress returns to session from its Thanksgiving break.
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