Allowing the middle-class tax rates to rise and failing to patch the Alternative Minimum Tax (AMT) could cut consumer spending on clothing and footwear and recreation by $7 billion each next year, according to a report released Monday by the White House in a bid to hasten a budget deal.


Failure to extend the tax cuts would cut overall growth of real consumer spending by 1.7 percentage points in 2013, according to The Middle-Class Tax Cuts’ Impact on Consumer Spending and Retailers, which was prepared by the Council of Economic Advisers. The report, which is laced with quotes from retail CEOs, warns that middle class consumers could even pull back on spending in the current holiday season if Congress does not agree to extend middle class tax cuts before 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,” reads a press release  issued by The White House. “A typical middle-class family of four would see its taxes rise by $2,200.”


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.


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.”
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