Focus Shifts to Tax Reform
Retailers and consumers scored a major victory in June when the Senate rejected efforts to delay a new federal law lowering debit card swipe fees by more than $1 billion a month. Barring last-minute moves by banks and credit card companies, swipe fee reform should take effect July 21, and retailers will be free to pass the savings along to their customers.
With that fight hopefully behind us, NRF is looking ahead to one of the next major battles in Congress — corporate tax reform.
As merchants know all too well, retail bears the highest effective tax rate of any industry. We benefit from few of the special breaks that amount to huge subsidies for other industries, like the R&D tax credit or special treatment for income earned overseas. NRF has long supported tax reform that would eliminate those breaks in return for lower rates, allowing corporations to make decisions based on business needs rather than tax implications.
Retail would see significantly lower taxes under such reform, but reform is not just about reducing taxes. Rather, it is a way of boosting the economy and job growth. Given the highly competitive nature of retail, NRF believes most of the reduction would be passed along to consumers through lower prices. That would enable retailers to increase sales, creating the need for more jobs and investment at every stage, from the cash register to wholesale suppliers to product manufacturers.
“The most important aspect of any tax reform measure is its impact on the economy and jobs,” Sears Holdings vice president for tax James Misplon told the House Ways and Means Committee when testifying last month on behalf of NRF. “It is vitally important that any tax reform measure do no harm to our economy.”
One thing retailers don’t want as part of reform is a Value Added Tax. A number of groups have promoted a VAT to reduce the deficit, but a 2010 study conducted for NRF by Ernst & Young found a VAT would cause the loss of 850,000 jobs the first year, reduce GDP for three years and bring a $2.5 trillion drop in retail spending in the first 10 years.
Most observers agree tax reform isn’t going to happen overnight. The last major tax reform act, signed by President Reagan in 1986, took two years to accomplish. While both the House and Senate have started hearings, no one expects reform to happen until after the 2012 elections, and then only if it is made a priority by President Obama or his successor.
It is precisely because tax reform is a long and deliberate process that NRF is reaching out this early. With our industry employing one out of every four U.S. workers and personal consumption powering two-thirds of the nation’s economy, retail needs to have a seat at the table. NRF will ensure that retail is well represented in these negotiations.