Retail Industry Leaders Association Executive Vice President for Government Affairs Jennifer Safavian recently issued the following statement as the House Ways and Means Committee began its hearing examining the economic and consumer impact of a border adjustable tax:
"As the nation's largest private-sector employer, retailers support pro-growth tax reform that lowers corporate rates, scrutinizes all deductions and credits in the code, and creates a level playing field among industries.
"Retailers will continue to aggressively oppose any plan that attempts to shift the nation's tax burden from certain corporations that currently are subject to low effective tax rates onto America's working families. The border adjustment tax would jeopardize 42 million jobs retailers currently support, and would put an undue burden onto millions of American families that are struggling.
Retailers are confident that tax reform can be a win-win for job creators and American families. We urge lawmakers to scrap the controversial and divisive border adjustment tax and focus on crafting a tax reform plan that benefits all Americans."
RILA provided a statement for the record during today's hearing in support of pro-growth tax reform without a harmful border adjustment tax. In her statement, Safavian reiterated the fact that a BAT picks winners and losers and gives an unfair, anti-competitive advantage to companies already paying much lower effective tax rates.
"American companies are at a huge competitive disadvantage with our international competitors," Safavian told the Committee. "This is not because of a mythical "Made in America" tax. Instead it is a result of the US statutory corporate tax rate being extremely high by international standards…The border adjustable tax would not improve US competitiveness. Instead, the border adjustable tax would impose price increases on American families, while also causing a devastating financial impact on the retail sector – so much so that the financial viability of many companies would be put into question."
Safavian also focused on the impact to American consumers.
"The border adjustable tax, which would in effect place a new 20% tax on imports while completely eliminating the tax on exports, will force retailers to significantly raise prices on everyday consumer staples such as food, medicine, clothing, electronics, and home improvement items. Many personal necessities like life-saving drugs and items essential to the operation of US small businesses, such as cell phones, have no domestically manufactured equivalent and will not in the foreseeable future. While margins on retail goods are already low, adding the border adjustable tax on top of the cost of those goods means that retailers have no other choice than to pass this additional tax onto American families."
Safavian shared findings from a survey of American retailers conducted earlier this year on the impact of the border adjustable tax and the provisions of the House Republican Tax Reform Blueprint in their entirety (i.e. 20% rate, full expensing, territorial tax system). The results were uniformly devastating for the retail industry.
Examples of the representative responses include:
- One retailer stated that their historic effective tax rate is 39%. Based on a three-year analysis, their effective tax rate would be between 140-288%.
- Another retailer found that their effective tax rate would go from 37% to 102% as a result of the border adjustable tax.
- Still another retailer's analysis showed their effective tax rate would go from 38% to between 84-94%.
- Beyond the increase in effective tax rates, one retailer explained that overall, they would go from a $1.5 billion net income to a $3.5 billion loss.
Safavian concluded her statement by reiterating the fact that should Congress impose a BAT, American consumers and retail jobs will be at risk.
"The border adjustable tax would disproportionately impact the retail sector because we import many products that are not able to be sourced domestically. Such a drastic new tax would undermine the benefits of a corporate tax rate reduction, precluding the industry from realizing potential economic growth. A border adjustable tax will lead to higher prices for American families and put many retail businesses at risk."
(Source: Retail Industry Leaders Association)
