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Public Policy

How retailers are responding to tax reform

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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:

  • 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.
  • 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.
  • McDonald’s will invest an additional $150 million over the next five years into its Archway to Opportunity program due in part to tax reform. By tripling this investment and expanding eligibility for the program, 400,000 employees will have the opportunity to further their education.

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.

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Tax Reform
Tax reform

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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