Yesterday, 11 major retail executives with the National Retail Federation (NRF) headed to Congress in an effort to thwart a tax reform that would put the burden of cost squarely on consumers through a shift away from income tax and towards consumption tax.
The plan, sponsored by Speaker of the House Paul Ryan, would implement a 20% tax on imported goods, jacking up consumer prices in the already struggling industry. The NRF urged Congress to reject this proposal, claiming that the $1 trillion border adjustment tax would drive up prices for consumers and cost the economy jobs.
“The most important aspect of any tax reform measure is its impact on the economy, jobs and the consumer,” NRF Senior Vice President for Government Relations David French said, noting that consumer spending represents two-thirds of the economy and that retail supports one out of four U.S. jobs. Tax reform that shifts the burden of the corporate tax to the consumer would present an unnecessary risk to our nation’s economy.
What the NRF encouraged is a reform of the current income tax structure by providing a broad base and low rates. “We believe that approach rather than a shift toward a consumption tax would bring the greatest economic efficiency and stimulate economic growth without causing the economic dislocations inherent in the transition to a new tax system,” French explained.
French’s comments came in a letter to the House Ways and Means Committee, which held a hearing yesterday on “How Tax Reform Will Grow Our Economy and Create Jobs.” The hearing focused on the “Better Way” tax reform proposal sponsored by Speaker Paul Ryan, R-Wis., and committee Chairman Kevin Brady, R-Texas.
The Ryan-Brady plan would transition the United States from its longstanding income tax system toward a consumption tax system. French said studies conducted for NRF show that alone would cause retail spending and employment to decline for an estimated six years—a burden the retail industry can’t stand to bear.
The plan also includes a proposal for a 20% border adjustment tax on imports, which French said would cause an even steeper decline in spending. NRF is leading the retail industry’s opposition to the BAT proposal, which is expected to be the subject of an additional hearing next week.
“We believe there are better options for tax reform that would achieve economic growth and not shift the burden to the consumer,” French said. He recommended that lawmakers consider as examples the 1986 Tax Reform Act enacted during the Reagan administration and the Tax Reform Act of 2014, which was proposed by former Ways and Means Chairman Dave Camp, R-Mich., but never saw passage.