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 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.
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.