* Report says economy would suffer if AMT tax not patched
* Latest salvo from White House in fiscal cliff battle
By Jeff Mason
WASHINGTON, Nov 26 A White House report says
that if that Congress allows taxes to go up on middle-class
families, consumers will spend $200 billion less in 2013.
The report by the White House's National Economic Council
and Council of Economic Advisers, released on Monday, was the
latest salvo by President Barack Obama to encourage lawmakers to
extend tax cuts for families making less than $250,000 a year
and fix a tax aimed at making sure wealthy people pay a mininum
The newly re-elected Democratic president is negotiating
with Republicans in Congress over the "fiscal cliff" - a
combination of tax increases and spending cuts that would go
into effect next year if the two sides do not reach a deal to
While the White House and Republican leaders wrangle over
raising taxes on the wealthy - a key campaign promise of the
president's - Obama would like Congress to pass measures now to
lock in lower tax rates for the middle class, the primary
constituency he courted in his re-election campaign.
"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 report said. "The Senate
has passed this bill and the president is ready to sign it."
The White House also wants lawmakers to fix the alternative
minimum tax, which was set up decades ago so that wealthy
Americans could not avoid taxes using legal tax breaks and
loopholes. The AMT was not indexed for inflation and has to be
updated or "patched" every year to avoid sweeping in millions of
less affluent taxpayers.
"Allowing the middle-class tax 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," the report
"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."
The CEA estimated that consumers would spend nearly $200
billion less next year as a result of higher taxes. The drop
would hurt the retail industry, which has accounted for nine
percent of employment growth since the U.S. recession ended in
June 2009, the report said.