Many Merchants Support White House Retail Report

Many merchants and retail organizations have rallied together in support of a new White House report, “The Middle-Class Tax Cut’s Impact on Consumer Spending & Retailers,” urging President Obama’s administration and Congress to extend tax cuts to the middle class, thereby preserving consumer confidence.

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Last week, President Obama repeated his call for Congress to act on his proposal, which the Senate has passed – a one-year extension of the tax cuts for every family making under $250,000 a year— or 98% or all Americans. According to the President’s proposal, the 98% of American families with annual incomes less than $250,000 would continue to benefit in full from the income tax cuts expiring at the end of 2012.

Without congressional action, according to the report, 114 million middle-class families will see their federal income taxes increase by an average of $1,600. According to the White House report, an increase in taxes for middle-income taxpayers on Jan. 1, 2013, would reduce consumer spending in 2013 by nearly $200 billion.

“The hard-earned rise in consumer confidence will be at risk if the middle-class tax cuts are not soon extended with a minimum of political drama,” according to the report.

The projected reduction of $200 billion in consumer spending (roughly 70% of the U.S. economy) is nearly four times the amount shoppers spent three days ago on Black Friday.

American consumers “are the bedrock” of the U.S. economy, according to the report, and “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 retail industry employs about 15 million Americans, and has been responsible for 9% of total employment growth in the 40 months since the recession ended in June 2009, according to the report. This year American consumers are on pace to spend about $5 trillion on retail sales.

If Congress does not act on the President’s plan to extend tax cuts for the middle-class, according to the report, “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.”

A recent report from the Congressional Budget Office said allowing the middle-class tax cuts to expire and letting taxes go up will impact consumer spending and the heretofore progressing economy.

National Retail Federation President and CEO Matthew Shay said in a statement today that it’s encouraging to see the Obama administration acknowledge that retailers and their customers will be among the hardest hit if elected officials fail to address ongoing economic uncertainty. But, Shay added, “just kicking the can down the road by cherry picking reforms only serves to reinforce the well-placed fears of American consumers and retailers that the status quo will once again rule the day.”

Here’s what some merchants had to say about the White House report:

Mike Duke, CEO of Walmart: “They are shopping for Christmas now and they don’t need uncertainty over a tax increase.”

Craig Jelinek, President and CEO of Costco Wholesale Corp.: “It is imperative that both sides of the aisle compromise … to eliminate uncertainty, and allow for continued economic recovery.”

Terry J. Lundgren, chairman, President and CEO of Macy’s: “These are not Democratic or Republican problems — they are American problems that affect every individual and industry, including fashion and retailing.”

Kevin Burke, President and CEO of the American Apparel & Footwear Association: “From a clothing and footwear industry perspective, the more confidence there is in the economy, the more we will be able to sell.”

Jim Tierney ([email protected]) is a senior writer for Multichannel Merchant. You can connect with him on Twitter (TierneyMCM) and LinkedIn, or call him at 203-899-8449.