New White House report helps Obama build public case for extending middle-class tax cuts The report is part of a strategy to pressure Congress to pass legislation that would immediately extend the George W. Bush-era tax cuts for families earning less than $250,000 a year. The Democrat-controlled Senate has already signed off on the legislation. Now it's up to the Republican-controlled House to decide whether it will follow. But Republicans so far have refused to "decouple" the middle-class tax cuts from those benefiting wealthy Americans. The higher-income tax cuts, which affect families earning more than $250,000 a year, are the central point of negotiation in talks between Obama and congressional leaders over how to avoid the year-end "fiscal cliff," a series of tax hikes and spending cuts that would suck $500 billion out of the economy next year and likely tip the nation into recession. The biggest part of the "fiscal cliff" comes from the end of the middle-class tax cuts and related provisions, which could take $200 billion out of the economy in 2013, according to the White House report, which was completed by the Council of Economic Advisers and National Economic Council. Other analysts at the nonpartisan Congressional Budget Office and Tax Policy Center have come up with similar findings. "While the president is committed to working with Congress to reach compromises on areas of disagreement, there is no reason to delay acting where everyone agrees: extending tax cuts for the middle class," a White House statement said. There is no reason to hold the middle class hostage while we debate tax cuts for the highest income earners. Consumer spending represents the lion's share share of economy activity, and nervousness about higher taxes could take a bite out of the economy as the year comes to an end. One-fifth of annual retail sales take place between now and Jan. 1. Consumer confidence took a deep fall in summer 2011, when the nation flirted with a default over the debt as Congress was paralyzed over questions of tax and spending policy. But although it remains a significant possibility, deep fears are not yet apparent among consumers this holiday season. This past weekend, consumers spent $59.1 billion on holiday shopping, 13 percent more than last year. The White House report says that letting the middle-class tax cut expire - and failing to patch the alternative minimum tax, which applies to many upper-middle-class households - could trim consumer spending by 1.7 percent in 2013. That, in turn, would slow economic growth by 1.4 percent. Consumer spending in recent years has been boosted by government support - including the payroll tax cut and expanded child tax credits. These measures have lifted the take-home pay of the average family making $50,000 a year by $3,600 over the past four years, according to the White House report. With staff meeting all last week, Obama and congressional leaders will resume fiscal-cliff negotiations as soon as this week. Republicans have acknowledged that the wealthy will have to pay more in taxes - in the past, the GOP has been open to about $800 billion more in tax revenue over 10 years. Republicans, however, say they won't go along with raising this additional revenue through higher tax rates. Rather, they say they want to do it by limiting tax deductions that disproportionately benefit rich people. Obama and the Democrats say that the wealthy should pay closer to $1.6 trillion in new taxes over the coming decade, and they prefer to start by allowing the upper-income tax cuts to expire, raising the top tax brackets from 33 percent and 35 percent to 36 percent and 39.6 percent, respectively. Obama says it is not possible to raise enough revenue by limiting tax deductions. Democrats, led by Sen. Patty Murray (D-Wash), say they are willing to go over the fiscal cliff if Republicans don't play ball. At the end of the year, without a compromise, nearly all Americans would experience tax hikes.