Despite talk of compromise, fiscal deal elusive

Associated Press Modified: November 26, 2012 at 7:31 pm •  Published: November 26, 2012
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In a new report, President Barack Obama's National Economic Council and his Council of Economic Advisers said 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 said.

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, 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 said 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.

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.

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.

Tennessee GOP Sen. Bob Corker is circulating a bill claiming $4.5 trillion in deficit savings over the coming decade, including $749 billion in higher tax revenue by capping itemized deductions at $50,000, a proposal that hits wealthier taxpayers the hardest.

Corker's plan — shared with the White House and congressional leaders — contains a roster of other budget proposals, including a less generous inflation adjustment for Social Security, and a gradual increase in Social Security eligibility to 68, and 67 for Medicare. Upper income earners also would pay more for Medicare.

But Carney said the tax revenue sought by Obama can't be achieved by simply restricting tax deductions

"Math tells us that you can't get the kind of balanced approach that you need without having rates be part of the equation," he said. "We haven't seen a proposal that achieves that, a realistic proposal that achieves that."

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Associated Press writer Andrew Taylor contributed to this report.



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