CEOs from some of the nation’s top retail companies met with President Trump at the White House Wednesday as NRF argued that comprehensive tax reform is needed but said a proposed $1 trillion “border adjustment” tax on imports would drive up prices for consumers and cost America jobs.
It “is going to add a new national sales tax on the price of everything that consumers buy,” NRF President and CEO Matthew Shay said during an interview on CNBC. “I don’t think that’s what the voting population voted for last November. There are other ways to get tax reform done.”
Shay called for tax reform but urged lawmakers to “go back to the drawing board.” He said reform could eliminate tax breaks that benefit only a few industries and lower corporate tax rates without harming consumers through a new import tax.
“Our goal with this meeting, in fighting border adjustment, is not to kill tax reform. It’s to save tax reform.”
“We’ve always supported income tax reform,” NRF Senior Vice President for Government Relations David French said in a separate interview on Fox Business. “Our goal with this meeting, in fighting border adjustment, is not to kill tax reform. It’s to save tax reform.”
“The voters who elected President Trump are the very same people who are going to pay the consumption tax that the border adjustment will become,” French said. “This is a hidden consumption tax, a hidden national sales tax. It will increase the cost of everything consumers buy from food to fuel to clothes and it is going to be a very expensive proposition.”
“The president has said that a border adjustment is too complicated [and] we agree with him,” French said. “We expect a productive meeting today at the White House.”
French cited NRF research that shows the average U.S. family would pay an extra $1,700 a year because of higher prices that would come from border adjustment, which would effectively impose a 20 percent tax on the cost of imported goods while exempting exports from taxes. Imported food, gasoline and cars would also be hit by the new tax, which is part of a larger proposal by House Republicans that would cut the current 35 percent corporate tax rate to 20 percent.
Watch NRF’s Matthew Shay discuss the implications of a border tax on CNBC.
Supporters claim the new tax on imports would be offset by the lower corporate tax rate and a stronger U.S. dollar but NRF has expressed concern that currency exchange rates would not adjust far enough or fast enough. Some retailers, especially those selling imported clothing, would be hit with tax bills three to five times as large as their profits, potentially forcing some retailers out of business. Other U.S. industries that rely on imports, including manufacturers that use foreign-made parts, could also be affected.
NRF took to the airwaves as Trump met Wednesday morning with executives from Target, Best Buy, Gap, JCPenney, Tractor Supply Co., Jo-Ann Fabric and Craft Stores, Walgreens Boots Alliance and AutoZone.
“We had a very positive and productive discussion with the president and his team about the important role that the retail industry plays in the American economy,” AutoZone CEO Bill Rhodes said after the meeting. “We look forward to carrying on the conversation with the president and his team.”
Trump, who dismissed border adjustment as “too complicated” last month, said he is preparing a tax reform proposal of his own but did not publicly address border adjustment Wednesday.
“Tax reform is one of the best opportunities to really impact our economy, so we’re doing a massive tax plan,” Trump said. “We’re going to simplify very greatly the tax code.”
The same retail executives also went to Capitol Hill for meetings with House and Senate members including House Ways and Means Committee Chairman Kevin Brady, R-Texas, who has co-sponsored the border adjustment plan along with Speaker Paul Ryan, R-Wis.
Meanwhile, Federal Reserve Chairwoman Janet Yellen told lawmakers that “there’s great uncertainty about how in reality markets would react” to border adjustment. “It’s very difficult to know just what would happen.”