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White House report: Not following the president's plan on taxes could ruin the holiday economy

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By Doug Powers  •  November 26, 2012 12:03 PM

**Written by Doug Powers

Alternate title: Raise taxes on the rich or Christmas gets it!

From Politico:

In a Monday report, the White House warned that failure to resolve the impasse over a tax and deficit deal could undermine consumer confidence this holiday season.

A new report from the National Economic Council and the Council of Economic Advisers timed to the online shopping holiday “cyber Monday” estimated that consumers could spend close to $200 billion less, while GDP growth could slow by 1.4 percentage points in 2013.

The report also warns that the psychological impact of a looming middle class tax hike could put a huge dent in retail sales over the holidays — traditionally the most important retail period of the year.

“Consumer confidence over the next several weeks is particularly important,” the report warns. “If Congress does not act on the president’s plan to extend tax cuts for the middle-class, it will be risking one of the key contributors to growth and jobs in our economy at the most important time of the year for retail stores.”

If raising taxes on households earning less than $250k per year would be bad for the economy, why wouldn’t raising taxes for households earning more than that also have a negative economic impact? Don’t the “rich” shop too?

A snapshot of where negotiations stand at the moment:

For now, Democrats are seeking $1.6 trillion in new taxes over the next decade collected from about 3 million families at the pinnacle of the income spectrum — those earning more than $250,000 a year. The Democrats want to start by letting the top two tax rates return to 36 percent and 39.6 percent when the Bush tax cuts expire.

Republicans insist on maintaining the Bush rates, at 33 percent and 35 percent, through 2013. Instead, they want to raise cash by rewriting the tax code to eliminate individual loopholes and deductions, an approach House Speaker John A. Boehner (R-Ohio) argues would be less harmful to businesses and the economy.

They’d also have to retroactively re-write the code to eliminate the preemptive dumping of assets and things like front-loaded contracts designed to avoid the coming tax hit, because that’s what’s happening.

If a “deal” is reached it will probably be more of the same: Higher taxes and a debt ceiling increase now purportedly offset by spending cuts that would go into effect the next time Halley’s Comet swings through the neighborhood. Instead of a plunge from the fiscal cliff we’ll probably end up getting another Triple Lindy into economic oblivion.

**Written by Doug Powers

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