Retail CEOs say 'yes' to tax reform, 'no' to BAT
While NRF strongly supports tax reform, retailers believe the BAT is bad tax policy that would increase costs on everyday necessities like food, gas, clothing and prescription medicines for the average family by as much as $1,700 in the first year alone.
“Executives from America’s largest private-sector employer are here to urge lawmakers to say ‘yes’ to tax reform but ‘no’ to doing it on the backs of consumers through a new import tax,” NRF President and CEO Matthew Shay said. “These retailers want to tell Congress and the administration just how crucial tax reform is to spurring increased investment and creating new jobs for our workers. But they are also emphasizing that we can’t afford to hobble our consumer-driven economy in the process and need to get it right the first time.”
The delegation included leadership from small businesses like Random Harvest from Virginia and Washington, D.C., and American Sale from Chicago, as well as executives from national retail brands including Ascena Retail Group, AutoNation, BJ’s Wholesale Club, Dillard’s, IKEA, Levi Strauss, Pier 1 Imports and QVC.
The United States has one of the highest corporate tax rates in the world and NRF has led the retail industry in advocating for comprehensive tax reform that would broaden the tax base and lower the rate. Retail benefits from few of the tax breaks that lower tax bills for other industries, and most retail companies pay at or close to the full 35 percent rate.
The “Better Way” tax reform plan proposed by House Speaker Paul Ryan, R-Wis., and Ways and Means Committee Chairman Kevin Brady, R-Texas, includes a provision that would, in effect, create a 20 percent border tax on imported goods by ending retailers’ ability to deduct the cost of merchandise that they import. That means retailers would be taxed at nearly the full selling price of imported merchandise rather than just their profit.
The border adjustment tax would have significant implications for retailers and other industries that import goods into the United States, including automobiles, technology, food and fuel. Analysis by NRF and many of its member companies indicates that the proposed tax would drive up costs, erode profits and exceed any benefits from a lower corporate tax rate. It would require price increases of 15 percent or more to retain profitability, effectively creating a new tax paid by consumers.
The BAT would also put at risk millions more retail-supported jobs than it would theoretically create for manufacturing. A BAT could cause retailers to see tax bills three to five times the amount of their profits, threatening to drive some merchants out of business. The small retailers that make up 98 percent of the retail industry and provide 40 percent of its jobs would be at the biggest risk.