While pundits have questioned whether tax reform will ever make its way through Congress, the National Retail Federation isn’t taking any chances.
As the House Ways and Means Committee held a hearing Thursday on “How Tax Reform Will Grow Our Economy and Create Jobs,” focusing on the “Better Way” tax reform proposal sponsored by Speaker Paul Ryan, (R., Wis.) and committee Chairman Kevin Brady, (R., Tex.), the NRF urged Congress to focus on updating the existing federal income tax system through comprehensive reform rather than moving toward a consumption tax.
Under either approach, Congress should reject a proposed $1 trillion border adjustment tax that NRF said would drive up prices for consumers and cost the economy jobs.
“The most important aspect of any tax reform measure is its impact on the economy, jobs and the consumer,” said David French, senior vice president for government relations at NRF.
French noted that consumer spending represents two-thirds of the economy and that retail supports 25% of U.S. jobs.
“Tax reform that shifts the burden of the corporate tax to the consumer would present an unnecessary risk to our nation’s economy,” French said. “Instead, we support a reform of the current income tax structure by providing a broad base and low rates. We believe that approach rather than a shift toward a consumption tax would bring the greatest economic efficiency and stimulate economic growth without causing the economic dislocations inherent in the transition to a new tax system.”
French said studies conducted for NRF show that alone would cause retail spending and employment to decline for an estimated six years. The plan also includes a proposal for a 20 percent border adjustment tax on imports, which French said would cause an even steeper decline in spending. NRF and groups such as the American Apparel & Footwear Association have come out strongly against the BAT proposal, which is scheduled to be the subject of an additional hearing next week.
“We believe there are better options for tax reform that would achieve economic growth and not shift the burden to the consumer,” French said.
He recommended that lawmakers consider as examples the 1986 Tax Reform Act enacted during the Reagan administration and the Tax Reform Act of 2014, which was proposed by former Ways and Means Chairman Dave Camp, (R., Mich.), but never saw passage.
The NRF is joined by several other groups like the Retail Industry Leaders of America in opposition to the BAT. Members of the RILA met with Treasury Secretary Steven Mnuchin on Tuesday to explain their position with hopes that he would educate members of Congress on the ways in which the provision would be detrimental.
Some businesses and politicians feel a BAT is needed to level the playing field for domestic manufacturers.
At the hearing, Zachary Mottl, chief alignment officer at Atlas Tool Works, based in Lyons, Ill., said, “The manufacturers I represent are so pleased that this committee has placed border adjustability at the center of its tax reform efforts so we can neutralize the border tax problems imposed on us by other countries and reclaim our competitive edge in international trade.”
Mottl said currently nearly every U.S. trading partner uses BAT systems in the form of value-added taxes for goods and services that act as a tariff and subsidy replacement.
“Most other countries have lowered tariffs, oftentimes through trade agreements, but then replaced those tariffs by combining a border adjustable consumption tax increase with a cut in non-border adjustable, usually income, taxes while maintaining similar overall tax revenue,” he said. “The shift from non-border adjustable to border adjustable taxes is their strategic secret, one that the U.S. government has not, in the past, figured out. The effect has been a major impediment to retaining and growing more manufacturing jobs in the USA and has resulted in the disenfranchisement of Main Street America on trade.”
Public hearings on what’s to become of the North American Free Trade Agreement once negotiations kick off began Tuesday, and those speaking on behalf of retail held little back.Read more
Though it’s teetering somewhere between dead and alive, it seems there’s more than one way to skin a BAT.Read more
In today’s competitive sourcing arena, Peru is an ideal destination for producing high-quality apparel, given its 5,000-year history in textiles and ability to adapt to current market needs.Read more
The European Commission has fined the tech giant for promoting paid results over others in its shopping comparison service Google Shopping.Read more
Debt is making it difficult for longstanding apparel brand Eddie Bauer to transform and improve performance in the current retail environment.Read more
Womenswear is changing it up and taking a more one-style-doesn’t-fit-all approach for S/S’18.Read more
A smooth Brexit. That's what the European Apparel & Textile Confederation Euratex is advocating in the hopes of keeping the intertwined supply chains of Europe and England functioning.Read more