How retailers are responding to tax reform
For years, the retail industry called on Congress to pass comprehensive tax reform to jump start the economy, grow wages and advance U.S. competitiveness on the global stage. Fortunately, a more competitive tax code is finally the law of the land, and retailers are beginning to assess what it means for their businesses and ways to incorporate savings.
For the retail industry, which previously paid the highest effective tax rate of any sector of the U.S. economy, the estimated savings amount to $171.4 billion over 10 years. So, how are retailers responding to a fairer tax environment? As NRF has said all along, the lower corporate tax rate will free up money to reinvest in businesses and employees.
It’s only been a few weeks since the new tax law took effect, and we are already seeing those predictions come to fruition. Employers across the country are investing in their workforce because of tax reform, and more than 3 million American workers are receiving special bonuses, higher wages or expanded benefits as a result. Retailers are among those leading the way:
- Walmart announced plans to give a one-time cash bonus of up to $1,000 to eligible associates, increase its starting wage to $11 an hour, expand its parental and maternity leave policy and provide adoption benefits.
- More than 100,000 Best Buy employees are receiving bonuses thanks to tax reform. A one-time bonus of $1,000 will be paid to full-time workers and part-time workers will receive $500. The retailer is also investing $20 million in technology training for young people.
Great news for a MN company thanks to #taxreform! All permanent full-time employees receive $1,000 bonus & part-time hourly employees get $500! Best Buy will also make $20M contribution to Best Buy Foundation to provide tech skills training to 1 mil underserved teens every year https://t.co/78FmwwUy53
— Rep. Erik Paulsen (@RepErikPaulsen) February 2, 2018
- Chipotle is using its tax savings to provide qualified employees cash and stock bonuses. The company is also investing in more employee training programs and enhanced parental leave, life insurance and short-term disability coverage.
- CVS Health will increase its starting pay for hourly employees to $11 per hour, offer full-time employees as much as four weeks of paid parental leave and keep a lid on worker health-care premiums because of tax reform.
This recent news only scratches the surface of the benefits we’ll see from tax reform as it ripples through the economy. As a diverse industry, retailers will react in a variety of ways with no one-size-fits-all response. To adapt to ecommerce and meet the need of their customers, many retailers will use their tax savings to invest in technology and innovation and expand their online footprint. In return, those investments will create stronger retail companies, more jobs and higher wages.
As employers identify ways to reinvest in their businesses and workforce, middle-class consumers — retail customers — will also soon see bigger paychecks because of tax reform. In fact, the average family of four earning $73,000 a year will receive an estimated annual tax cut of more than $2,000.
The bottom line is that tax reform will go a long way in boosting the economy and creating more opportunities for America’s workers, and this is just the beginning.
With few of the credits and deductions that ease other industries’ tax burdens, retailers pay the highest taxes of any industry.
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Find out how the retail industry impacts jobs, income and GDP in your state. View the map and check out the data.