At a House Ways and Means Committee hearing this week examining tax reform, the Retail Industry Leaders Association (RILA) cautioned lawmakers about the potential impacts of a border adjustable tax (BAT).
The BAT would modify the tax code to require companies that sell products in the United States that are produced overseas to pay an income tax. U.S. companies that produce products that are sold overseas would also not have to pay an income tax, because the products are not sold in the United States.
The income tax would apply to products made and sold in the United States as well as products imported from overseas and sold here. Currently, only companies that make and sell a product overseas must pay income tax.
“The border adjustable tax would not improve U.S. competitiveness. Instead, the border adjustable tax would impose price increases on American families, while also causing a devastating financial impact on the retail sector – so much so that the financial viability of many companies would be put into question,” Jennifer Safavian, RILA’s executive vice president for government affairs, testified to the committee.
She said it would force retailers to raise prices on consumer staples such as food, medicine, clothing, electronics, and home improvement items.
“While margins on retail goods are already low, adding the border adjustable tax on top of the cost of those goods means that retailers have no other choice than to pass this additional tax onto American families,” Safavian said.
Should Congress impose a BAT, American consumers and retail jobs will be at risk, she added.
“The border adjustable tax would disproportionately impact the retail sector because we import many products that are not able to be sourced domestically. Such a drastic new tax would undermine the benefits of a corporate tax rate reduction, precluding the industry from realizing potential economic growth. A border adjustable tax will lead to higher prices for American families and put many retail businesses at risk,” Safavian said.
Safavian said retailers will oppose any plan that attempts to shift the nation’s tax burden from certain corporations that currently are subject to low effective tax rates onto working families.
“The border adjustment tax would jeopardize 42 million jobs retailers currently support, and would put an undue burden onto millions of American families that are struggling,” she said.