WASHINGTON – Retailers would “have no choice” but to pass the higher costs on to consumers if Congress passes a proposed $1 trillion border adjustment tax as part of tax reform, the National Retail Federation said today.
"Under this proposal, many retailers will have a tax burden that is larger than their profits. …Obviously, they will have no choice but to pass the tax cost forward to their customers."David French
NRF Senior Vice President for Government Relations
“The border tax proposal would cause the tax burden on retailers to skyrocket,” NRF Senior Vice President for Government Relations David French wrote in a statement submitted to the House Ways and Means Committee. “Under this proposal, many retailers will have a tax burden that is larger than their profits. …Obviously, they will have no choice but to pass the tax cost forward to their customers. …Small businesses may be particularly vulnerable to the impact of the border tax on prices.”
The committee is holding a hearing this morning on the border adjustment proposal, which is part of the “Better Way” tax reform plan proposed by House Speaker Paul Ryan, R-Wis., and committee Chairman Kevin Brady, R-Texas.
“The retail industry has been a strong proponent of income tax reform,” French said. “We believe that income tax reform that lowers the rates and broadens the tax base can provide economic growth for the economy as a whole and can be good for the American consumer. We do not believe that a new tax system that shifts the burden of taxation to the consumer is good for our industry, which is the nation’s largest employer, or good for the American consumer.”
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 corporate tax rate. Retail benefits from few of the tax breaks that lower tax bills for other industries, and pays at or close to the full 35 percent statutory rate.
Among other provisions, the Ryan-Brady plan would create a 20 percent 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, amounting to $1 trillion in extra costs over the first 10 years.
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 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 of retail-supported jobs. 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.
The National Retail Federation is the world’s largest retail trade association. Based in Washington, D.C., NRF represents discount and department stores, home goods and specialty stores, Main Street merchants, grocers, wholesalers, chain restaurants and internet retailers from the United States and more than 45 countries. Retail is the nation’s largest private-sector employer, supporting one in four U.S. jobs — 42 million working Americans. Contributing $2.6 trillion to annual GDP, retail is a daily barometer for the nation’s economy. NRF.com