Urging Congress to renew the tax cuts for middle-class families, the White House released a report on Monday suggesting that allowing the tax cuts to expire could have a significant impact on the U.S. economy.
The report, from President Barack Obama's National Economic Council and Council of Economic Advisers, said allowing middle-class rates to rise and failing to patch the Alternative Minimum Tax could cut the growth of real consumer spending by 1.7 percentage points in 2013.
In light of the importance of consumer spending to the U.S. economy, the slowdown in spending could reduce real GDP by 1.4 percentage points, the report said.
The CEA estimated that consumers could spend nearly $200 billion less than they otherwise would have in 2013 because of higher taxes.
The $200 billion is approximately four times the total amount that shoppers spent on Black Friday weekend in 2011, the White House noted.
Subsequently, Obama renewed his call for Congress to pass a bill that extends the current tax rates on the first $250,000 of income.
The White House said such a bill would stop income taxes from going up for 98 percent of American families and 97 percent of small businesses.
If Congress doesn't act, the typical middle-class family will see their taxes go up by $2,200 next year, the White House added.
In a weekly address earlier this month, Obama said, "The Senate has already passed a bill like this. Democrats in the House are ready to pass one, too. All we need is for Republicans in the House to come on board."
"We shouldn't hold the middle class hostage while Congress debates tax cuts for the wealthy," he added. "Let's begin our work by actually doing what we all agree on. Let's keep taxes low for the middle class."
Meanwhile, Republicans have called for an extension of the tax cuts for all Americans, including those making more than $250,000 a year.
by RTT Staff Writer
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