There is no denying the U.S. tax code is in need of an overhaul.
The current system is complex, inefficient and picks winners and losers. As it stands, U.S. retailers are on the losing end of the deal.
Under the current tax code retailers pay among the highest domestic effective tax rates of all industries, at more than 36%. For this reason, retailers have always believed that comprehensive tax reform is good for business and even better for U.S. consumers. For years, the retail industry has urged Congress and the administration to work together to find solutions that update our outdated and inefficient tax code.
While we believe in moving the ball forward toward comprehensive tax reform, the way in which Congress is doing so could upend the retail industry. In its proposal, Congress has put forth a provision, known as a “border adjustable tax,” which would effectively tax every import entering the United States by upward of 20%. This tax would largely be paid by 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. However, 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 United States and, for the foreseeable future, never will be.
Tax reform should promote economic growth and job creation. However, the House Republican proposal would do no such thing. Instead, the plan would effectively give $4.6 trillion of that money to GE, Caterpillar, Boeing and other large, profitable companies to erase their tax bills. The impact will be that families will pay more so that some companies can operate tax-free.
Implementing a border adjustable tax means businesses and retailers will be forced to pass these additional expenses on to consumers. In fact, it’s estimated that American families will pay as much as $1,700 more each year for essential products like food, clothing and medicine. In addition, the retail industry would be forced to downsize operations to offset the costs of a border adjustable tax. That means putting hardworking Americans out of work.
This February, the Retail Industry Leaders Association (RILA) and its members met with President Trump to voice our concerns about the implications a border adjustable tax would have on retail. Since then we have held more than 250 meetings with lawmakers to educate them on the negative economic implications this provision will have. We have also banded together with businesses and industries that face a similar impact under the border adjustable tax. A coalition of more than 400 businesses and trade associations behind 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, which means there’s no realistic pathway in the Senate for the border adjustable tax, and the viability of the proposal in the House is also in question.

Skepticism among lawmakers and the public toward the border adjustable tax is growing. In April, when the White House released its outline for tax reform, the border adjustable tax was nowhere to be found. What was in the outline was a commitment from the president that seemed to foreshadow the ultimate demise of the border adjustable tax.
With widespread opposition in the Senate and growing opposition in the House, it is likely impossible for President Trump to achieve that goal with any legislation that includes the border adjustable tax. While it is far too soon to stop the fight or rest easy, the political prospects of the border adjustable tax grow dimmer by the day.
RILA remains committed to working with lawmakers to voice the industry’s concern over the harmful impact of a border adjustable tax. As Congress moves forward with tax reform plans, we are continuing to work with industry stakeholders and policymakers alike to ensure that tax reform advances without this harmful provision. As the nation’s largest private sector employer, it’s vital to retail and our economy that Congress pass pro-growth comprehensive tax reform this year. We are doing everything we can to ensure that retail comes out a winner. 

Favorite