Report Details Consequences if Congress Fails to Extend Middle-Class Tax Cuts
WASHINGTON, DC – As we move into the holiday shopping season, the White House released a report from the National Economic Council and the Council of Economic Advisers called The Middle-Class Tax Cuts’ Impact on Consumer Spending and Retailers. This report provides new analysis on the impact to retailers and consumer spending if Congress fails to act to avoid taxes going up on 98 percent of Americans at the end of the year.
This report is embargoed until 6am ET. The link to the full report can be found HERE.
The President believes Democrats and Republicans should come together to renew middle-class tax cuts so families and businesses have more certainty at this critical time for our economy. If Congress acts, every American will get a tax break on their first $250,000 of income, and income taxes won’t go up for 98 percent of American families and 97 percent of small businesses. The President believes we must take a balanced approach to reduce our deficit, that’s why he has laid out a $4 trillion deficit reduction plan that asks the wealthy to pay a little more and preserves the investments we need to grow the economy. The President has already signed $1.1 trillion in spending cuts and he looks forward to working with Democrats and Republicans on a balanced approach to further reduce our deficit. This is an important moment not just to avoid the fiscal cliff—but to lay the groundwork for an economy that will support a healthy middle class, restore economic certainty, and lead to long-term job growth.
If Congress doesn’t act, middle-class families will see their income taxes go up on January 1st. The typical middle-class family will see their taxes go up by $2,200 next year, negatively impacting businesses and retailers across the nation. The President has called on Congress to take action and stop holding the middle class and our economy hostage over a disagreement on tax cuts for households with incomes over $250,000 per year.
Summary of White House Report: The Middle-Class Tax Cuts’ Impact on Consumer Spending and Retailers
President Obama is committed to growing our economy from the middle out by ensuring a strong, secure, and thriving middle-class. That’s why his top priority is promoting jobs and growth while reducing our deficit in a balanced and responsible way.
Since taking office, President Obama has repeatedly cut taxes for middle-class families to make it easier for them to make ends meet. A typical family making $50,000 a year has received tax cuts totaling $3,600 over the past four years – more if it was putting a child through college.
Now we face a deadline that requires action on jobs, taxes and deficits by the end of the year. If Congress fails to act, every American family’s taxes will automatically go up – including the 98 percent of Americans who make less than $250,000 a year and the 97 percent of small businesses that earn less than $250,000 a year. A typical middle-class family of four would see its taxes rise by $2,200.
While the President is committed to working with Congress to reach compromises on areas of disagreement, there is no reason to delay acting where everyone agrees: extending tax cuts for the middle-class. There is no reason to hold the middle-class hostage while we debate tax cuts for the highest income earners.
Our economy can’t afford that right now. New analysis by the President’s Council of Economic Advisers (CEA) finds that:
- Allowing the middle-class tax rates to rise and failing to patch the Alternative Minimum Tax (AMT) could cut the growth of real consumer spending by 1.7 percentage points in 2013. This sharp rise in middle-class taxes and the resulting decline in consumption could slow the growth of real GDP by 1.4 percentage points, which is consistent with recently published estimates from the Congressional Budget Office.
- Faced with these tax hikes, the CEA estimates that consumers could spend nearly $200 billion less than they otherwise would have in 2013 just because of higher taxes. This reduction of $200 billion is approximately four times the total amount that 226 million shoppers spent on Black Friday weekend last year. As Figure 5 shows, this $200 billion reduction would likely be spread across all areas of consumer spending.
American consumers are the bedrock of our economy, driving more than two-thirds of the overall rise in real GDP over 13 consecutive quarters of economic recovery since the middle of 2009. And as we approach the holiday season, which accounts for close to one-fifth of industry sales, retailers can’t afford the threat of tax increases on middle-class families.
President Obama and Congressional Democrats have proposed to extend all the income tax cuts that benefit families who make less than $250,000 per year.
The President has called on Congress to act now on extending all income tax cuts for 98 percent of American families and not to hold the middle-class and our economy hostage over a disagreement on tax cuts for households with incomes over $250,000 per year. The Senate has passed this bill and the President is ready to sign it.