Retailers are against the proposed border adjustment tax for good measure. The possible import tax could result in higher prices for goods, costing consumers roughly $1,700 more a year, CNBC reports. Retail executives were set to meet with the Treasury Secretary in May to protest the implementation of the controversial tax that would allow companies to deduct the cost of American-made products, but increase the cost of foreign imports.
As one of the Republicans’ key measures in their tax reform tax plan, the tax proposal aims to help keep jobs in the U.S. but retailers have been lobbying against it as they only see the risk of losing millions in profits if passed. Major retail associations, including the National Retail Federation and Retail Industry Leaders Association, want pro-growth tax reform but they want it accomplished in a way that doesn’t disrupt the supply chain while allowing American companies to retain their profits.
The House Ways and Means Committee started their series of hearings in late May to discuss the GOP’s tax reform blueprint, including the highly controversial border adjustment tax proposal. The U.S. is only major industrialized nation that uses a “worldwide” tax system, taxing U.S. exports twice – once by the country where they are sold, and a second time when profits are repatriated to the U.S., rather than a “territorial” tax system, where goods are taxed by the country they are consumed in. Despite differences, Republicans and Democrats agree that lower tax rates and a broadening of the tax base would lead to greater economic growth and increase jobs. The outcome is yet to be seen but there is concern that eliminating tax preferences would cause economic disruption to the retail industry and businesses at large that have made investment decisions based on existing tax law.
If the proposed border adjustment tax does not receive support and its estimated $1.1 trillion increase in federal revenues is not felt over the next decade, Congress and the White House will look elsewhere for revenue generation. Possibly putting provisions such as Section 1031 like-kind exchanges and capital gains treatment for carried interest on the chopping block.
Sources:
Bisnow, Major Retail CEOs Meet With Mnuchin To Lobby Against Proposed Import Tax