Retail Executive

SEP-OCT 2017

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The Truth About The Border Adjustment Tax If passed, the border adjustment tax will harm retailers and consumers. B R I A N D O D G E Senior EVP of Public Affairs, Retail Industry Leaders Association (RILA) offset the costs of a border adjustable tax. That means putting hardworking Americans out of a job. While vocal about the need for tax reform, retailers have had to turn their attention first to stopping the harmful border adjustment tax. Working with businesses and in- dustries that face a similar impact under the border ad- justment tax, retailers are educating lawmakers about the impact. The campaign, Americans for Affordable Products, has moved quickly to engage a diverse set of stakeholders to press members of Congress to speak out against the proposal. To date, dozens of lawmakers have expressed concerns, so many that no realistic pathway ex- ists in the Senate for the border adjustable tax, and even the viability of the proposal in the House is in question. HOUSE, SENATE OPPOSE TAX At the other end of Pennsylvania Avenue, skepticism toward the border adjustment tax seems to be growing. In April, when the White House released its outline for tax reform, the border adjustment tax was nowhere to be found. What was in the outline was a commitment from the president that seemed to foreshadow the ulti- mate demise of the border adjustment tax. According to the 2017 Tax Reform for Economic Growth and American Jobs, "Working with the House and Senate, the Administration will develop the details of a tax plan that provide massive tax relief, create jobs, and make America more competitive — and can pass both chambers." With widespread opposition in the Senate and growing opposition in the House, it is likely impossible for Presi- dent Trump to achieve that goal with any legislation that includes the border adjustable tax. While it is too soon to stop the fight or rest easy, the political prospects of the border adjustable tax grow dimmer by the day. As Congress moves forward with tax reform plans, RILA, along with our members, will continue to work with industry partners and policy makers alike to en- sure that tax reform advances without the harmful border adjustable tax, and that we can pass progrowth comprehensive tax reform this year. R he American tax code is a mess. It is com- plex, inefficient, and most importantly, it picks winners and losers. For example, the retail industry, which supports more Amer- ican jobs than any other industry, pays among the highest domestic effective tax rates of all industries, at more than 36 percent. While some industries benefit from special treatment that lowers their tax burden, retailers enjoy few, if any, such deductions. For this reason, retailers have always believed that comprehensive tax reform is good for business and even better for American consum- ers. For years, the retail industry has urged Congress and the White House to work together to find a solution that updates our current outdated and inefficient tax code. Unfortunately, now as Congress finally begins to move tax reform forward, it does so with a proposal that would accentuate the inequity in the tax code and put an enor- mous new burden on retailers and their customers. Tax reform should promote growth, job creation, and fairness. However, the House Republican "border ad- justment tax" proposal would do nothing of the sort. Instead, the proposal would impose a 20 percent tax on all imported goods. This tax, which would collect $5.7 trillion over ten years, would be largely paid by Amer- ican families in the form of higher prices for the goods they need. Proponents of the idea insist that such a provision would incentivize more businesses to sell "Made in America" products and create jobs here at home. How- ever, this fails to consider the complexity of modern supply chains and the demand for items that are not readily available to consumers at certain times, if at all. There are certain products that can't be produced here in the U.S. and, for the foreseeable future, never will be. Implementing a border adjustable tax means busi- nesses will be forced to pass these additional expenses on to consumers. In fact, it's estimated that American families will be forced to pay as much as $1,700 more each year for everyday essential products like food, clothing, and medicine. In addition, the retail indus- try would be forced to downsize operations in effort to T TAX CODE Deep Dive By B. Dodge THE TRUTH ABOUT THE BORDER ADJUSTMENT TAX RETAILEXECUTIVE.COM SEPTEMBER/OCTOBER 2017 40

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