r960-071c41378a2a7470bfd34615caf06a4f.jpg


Major retailers are skeptical of the House Republican plan to revamp the tax code, fearing that the GOP call to border-adjust corporate taxes could harm them even if they win a significant cut to their tax rate.

As a result, retailers, oil refiners and other industries that import goods to sell in the U.S. could provide a major obstacle to the Republican effort to reform taxes.

The plan, rolled out in June by House Speaker Paul Ryan, would cut the corporate tax rate from 35 percent to 20 percent, a reduction long sought by businesses. But the bold plan to tax sales within the U.S. while exempting sales outside the country has caused some interests to balk.

“At the end of the day, we don’t get a rate cut,” said Jennifer Safavian, the executive vice president of government affairs for the Retail Industry Leaders Association. “We would see no benefit from this. We would see harm.”

At issue is the border-adjustment feature, which would be a radical change to the administration of corporate taxes, meant to eliminate the incentives for businesses to move headquarters or operations overseas.

The border adjustment would work by allowing businesses to deduct overseas sales from their taxable income, but not deduct the cost of imported goods that they use or resell. In contrast, today businesses are taxed on profits, wherever they are earned.

In other words, a medical device maker selling stents in China would not be taxed on those sales. A clothes store importing sweaters from China, on the other hand, would not be able to subtract the cost of those sweaters in calculating taxable income.

The effect of the border adjustment, retailers fear, would be that the goods they import to sell to consumers would face a 20 percent mark-up, one that would force retailers like Walmart, the Home Depot and Sears, all members of Safavian’s group, to raise prices and lose customers.

Supporters of the border-adjustment acknowledge that possibility, but respond that the dollar would appreciate in response to the tax change, making retailers’ dollars go further in buying imports, and thus leveling the playing field. In an analysis published last week, the Tax Foundation, a think tank that advocates business tax reform, called fears about the border-adjustment’s economic impact “overblown.”

Eric Trump cancels auction with Ivanka due to conflict of interest

Also from the Washington Examiner

“As unfortunate as it is, I understand the quagmire,” Eric Trump said. “You do a good thing that backfires.”

12/22/16 12:06 AM

Yet there are not enough clear-cut examples of such dollar movements to set the retail lobby at ease about the novel idea. A representative for the National Retail Federation called the GOP proposal “an exotic economics lab experiment.”

Already, the Retail Industry Leaders Association has had multiple meetings with the Ways and Means Committee, the committee responsible for writing the bill. So far, the committee’s chairman, Kevin Brady of Texas, has insisted that the provision is staying in.

The next step for retailers would be to try to sway lawmakers off the committee and in the Senate.

The border-adjustment plan was not part of President-elect Trump’s campaign tax proposal. It could appeal to Trump, however, because it is meant to prevent offshoring of jobs and “inversions” of U.S. corporate headquarters to tax havens. With a destination-based tax system, corporations wouldn’t benefit from locating in low-tax jurisdictions, as the Treasury would receive the same revenues in either case, the thinking goes.

In one sign that Trump would be amenable to such a case for the provision, incoming White House chief of staff Reince Priebus spoke favorably of it in an interview last week.

Trump reminds GOP free traders he's the new boss

Also from the Washington Examiner

But the Republican’s election victory didn’t make all policy disagreements disappear overnight.

12/22/16 12:01 AM

Meet the Democrats who want to abolish the Electoral College

Top Story

A growing number of Democrats are interested in changing or even completely eliminating the Electoral College.

12/21/16 11:01 PM



Source link

About the Author:

Leave a Reply