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August 1, 2014

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White House: Tax hike threat could hurt retailers

WASHINGTON — Despite early signs of robust sales, White House economists warned Monday that the uncertainty of a potential hike in taxes next year for middle class taxpayers under the looming fiscal cliff could hurt consumer confidence during the crucial holiday shopping season.

In a new report that coincides with Congress' return after the Thanksgiving holiday, the White House says that if lawmakers don't halt the automatic increase in taxes for households earning less than $250,000, consumers might even curtail their shopping during the current holiday season.

"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," the report by President Barack Obama's National Economic Council and his Council of Economic Advisers says.

The report comes as official Washington dives back into negotiations on how to avoid tax hikes and deep spending cuts scheduled to begin taking effect Jan. 1.

White House and congressional leadership aides said Obama spoke separately with House Speaker John Boehner and Democratic Senate Majority Leader Harry Reid over the weekend. The aides would not reveal details of the conversations. Obama last met with the bipartisan congressional leadership to discuss the fiscal cliff on Nov. 16. No new meetings have been announced.

Meanwhile, the stock market edged lower in the morning as the outcome of the budget talks remained inconclusive.

Retailers such as Macy's, Target and Saks were down in early trading, amid fears that consumers might cut back this season. But the National Retail Federation reported earlier that 247 million shoppers visited stores and shopping websites during the long Thanksgiving weekend, up 9 percent from a year ago. They spent an average of $423, up 6 percent.

The White House report also says a sudden increase in taxes for middle-income taxpayers would reduce consumer spending in 2013 by nearly $200 billion, significantly slowing the economic recovery.

The figures echo estimates by private forecasters and by the Congressional Budget Office.

Congress and Obama have until the end of the year to avoid across the board tax increases that would do away with rates set during the administration of President George W. Bush and restore higher tax rates in place during President Bill Clinton's administration when the economy was robust and the federal government had a budget surplus.

Many middle income taxpayers also would be exposed to automatic tax increases under the Alternative Minimum Tax, which is designed to guarantee a certain level of tax payment by wealthier taxpayers.

According to the report, a married couple earning between $50,000 and $85,000 with two children would see a $2,200 increase in their taxes.

Obama wants the Bush-era tax rates to remain at their current level for households earning less than $250,000. He is calling on Congress to increase taxes for families earning more than that threshold.

Obama's plan is part of an overall deficit reduction package that would increase tax revenue by about $1.5 trillion and reduce spending by a similar amount over 10 years.

Congressional Republicans, led by Boehner, have said they are open to including discussions about additional revenue but have balked at any plan that raises tax rates on the wealthy. They argue that the higher rates would also hit some small businesses, stifling economic growth.

Instead, they have advocated changes in the tax code that would eliminate tax breaks and loopholes that primarily benefit the wealthy. Several key Republican lawmakers have also said they would not be bound by a no-tax-increase pledge that they have adhered to in the past.

House Majority Leader Eric Cantor said Monday the urgency of finding solutions intensifies as the end of the year approaches.

"If we don't do anything, on Jan. 1, 2013, there's a lot more people paying a lot more," the Virginia Republican said on MSNBC.

Cantor said the rapidly approaching deadline accounts for the more serious tone to the debate, but also reaffirmed the GOP's opposition to raising tax rates for the wealthy. "We've got to have the president step up and say, here's my position on how we reform these entitlements and start managing down the deficits," he said.

"What should be on the table is a recipe to fix the problem and not give away growth," Cantor said, when asked whether Republicans would agree to have increases in tax rates considered.

"We were re-elected to fix the problems, get the economy going again," he said. "Well, the president got re-elected and we know at the end of the year taxes are going to go up on everybody, rich and poor alike," if no action is taken to avert the hikes.

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  1. Either there will be deal by mid December, or this thing goes off the imaginary "Fiscal Cliff."

    All indications show this thing will not be resolved until early next year, 2013. No, the country will not go off the cliff. This is all hype, a scare tactic.

    What this will do is break the Grover Norquist hold on House Republicans, and break the Tea Party hold around the neck of the USA economy. Both have create the uncertainty American business' are experiencing.

    Creating Uncertainty, was the main goal of the House Republicans. By actions and by so many words, telling and showing the American People they would shut down the US government by saying "no" to everything. Even saying "No" to items the Republicans once championed and initiated in the past. Try and true conventions the Republican Party once used to connect with voters,...thrown out the window with the intent to create Uncertainty at all levels of the American economy with one goal in mind,...to remove President Obama by replacing him with Mitt Romney on November 6, 2012. Well, that didn't work. The majority of the America People rejected the Republican Party and rejected Mitt Romney on November 6, 2012.

    Uncertainty still remains, and the creators of uncertainty are still among the House Republicans until 2013. In 2013, the so called Fiscal Cliff will come and go, Grover Norguist will lose his control over closet Republican who are actually moderates. The Tea Party will be a footnote, and uncertainty will be broken.

    The country went through an unnecessary crisis, a man made event. A crisis that was in play from day one of President Obama taking office. A crisis of Uncertainty. All coming from House and Senate Republicans, holding the American economy in a choke hold, all to removed one Man from the highest office in the land. Well, that strategy failed. The majority of the American People rejected the malaise created by House and Senate Republicans, rejecting Uncertainty.