White House officials and congressional Republicans and Democrats are negotiating a new budget deal to avoid what they call “the fiscal cliff,” a series of automatic tax hikes and spending cuts that take effect in the absence of an agreement; that includes the expiration of the George W. Bush tax cuts.
Obama wants to extend the Bush tax cuts for everyone except Americans who make more than $250,000 a year; the Republicans want to extend all the Bush tax cuts.
Should all the tax cuts expire — a de facto tax hike for all Americans — it would hurt the economy, says the new report from Obama’s Council of Economic Advisers.
The report says:
“– 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.
Information from USA Today contributed to this report.
