Tax Reform

business people meeting

The issue

Retailers have been among the biggest winners under the first comprehensive rewrite of federal tax law in three decades. NRF believes the Tax Cuts and Jobs Act has helped “boost our nation’s economy more than anything we have seen in decades.”

The new law eliminated a wide range of corporate tax breaks and used the money saved to lower rates for all businesses, large and small alike, a goal long sought by NRF and the retail industry. The corporate tax rate was reduced to 21 percent from 35 percent, and small business “pass throughs” received a 20 percent deduction. The measure also provided relief for middle-class taxpayers.

NRF called passage a “major victory for retailers,” who had benefited from few of the deductions and credits that lowered tax bills for other industries under previous tax law and consequently paid among the highest effective tax rates of any industry. During debate in Congress, NRF called tax reform “the key to prosperity that small businesses, large employers and middle-class workers have all been waiting for more than a generation.” (The last comprehensive rewrite of the tax code had taken place in 1986.)

Why it matters to retailers

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With retailers paying at or close to the full 35 percent corporate tax rate in the past, the industry was a strong supporter of reform that would broaden the tax base and lower rates. As far back as 2013, the NRF Board of Directors adopted a formal set of tax reform principles intended to boost the economy and encourage job growth – many of which can be seen in the tax reform law that is now in effect. Retailers should save an estimated $171.4 billion over 10 years thanks to tax reform, according to the University of Pennsylvania’s Wharton School of Business. And announcements made by retailers show many have used the savings to reinvest in their businesses and employees, both creating jobs and raising wages.

NRF advocates for corporate tax reform

NRF campaigned heavily for reform, saying lower business taxes would free up resources to create jobs and bring back investment that has gone overseas to countries with lower rates while middle-class tax cuts for individuals would put money into consumers’ pockets. NRF brought retail CEOs to Washington to meet with members of President Trump’s cabinet, and NRF President and CEO Matthew Shay met with Trump at the White House to voice retailers’ commitment to reform and explain its impact on the industry. NRF arranged for Treasury Secretary Steven Mnuchin to address retailers, and Shay praised benefits for small businesses during a news conference at the U.S. Capitol with Senate Majority Leader Mitch McConnell.

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In addition to helping win passage of tax reform, NRF has successfully opposed efforts to replace the federal income tax system with a national retail sales tax or add a sales tax on top of the current system, saying consumption taxes are regressive and place a disproportionate tax burden on low-income families.