COMMENTARY: BAT would negate benefits of tax reform

RILA argues retailers are interested in tax overhaul, just not at expense of their viability

By: Brian Dodge
Photo: allensima/Shutterstock
   Following years of gridlock on Capitol Hill regarding how to approach comprehensive tax reform, the prospect of addressing the issue seems increasingly imminent.  
   For most industries, including retail, comprehensive tax reform has been a top priority, as the current tax code is both outdated and inefficient. As the second-largest private sector employer in the U.S. paying the fourth highest domestic effective tax rate, retailers have long been advocates for comprehensive tax reform that promotes fairness, growth, and job creation.
   However, as the White House and Congressional leaders finally align on the need to enact tax reform, there is one component of the proposed plan that would significantly threaten the livelihood of the retail industry altogether – a border adjustable tax. 
   In short, a border adjustable tax would place a tax on imports. All goods coming into the U.S. under this plan, would face a new tax. This would effectively be a new tax on consumers as the cost of common household essentials would rise by as much as 20 percent.  
   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. The fact is, unfortunately, we can’t grow bananas in Kansas. There are certain products that can’t be produced here in the U.S. and for the foreseeable future, never will be.
   Implementing a border adjustable tax means businesses will be forced to pass these additional expenses on to consumers. In fact, it’s estimated that everyday essential products like food, clothing, and medicine would cost consumers $1 trillion more over the next 10 years. In addition, the retail industry, which is now one of our nation’s largest private-sector employers, would be forced to downsize operations in an effort to offset the costs of a border adjustable tax. That means putting hardworking Americans out of a job.  
   So how did we get here? The border adjustable tax proposal was first introduced as part of the House Republican Tax Reform Blueprint issued in June 2016. This blueprint was initially intended to be just that – a blueprint. However, following the unexpected outcome of the presidential election, it became less of a talking point and more of a plan of action, which members of the tax-writing House Ways and Means Committee have stood by as a viable framework for comprehensive tax reform moving forward. 
   Even President Donald Trump, who campaigned heavily on the need for real changes in the tax code, has expressed skepticism of a border adjustable tax. While he briefly mentioned the idea as a revenue stream to pay for the construction of a wall along the Mexican border, the president has since walked back his support of the plan, and has publicly expressed his concerns with the idea. It remains to be seen where he will ultimately stand on the issue. 
   While the business community, and retailers in particular, were initially optimistic about the possibility of Congress enacting comprehensive tax reform in the near term, the inclusion of a border adjustable tax in this plan would negate any positive results from such reforms. RILA believes that enacting comprehensive tax reform that lowers effective tax rates for retailers would stimulate job growth in the retail sector in addition to the many industries and communities supported by retail.  
   As Congress moves forward with tax reform plans, RILA, along with our members and the Americans for Affordable Products Coalition, plans on working with industry partners and policymakers alike to ensure that any legislation omits this harmful border adjustable tax, and rather, supports job growth and lower prices for consumers. 

Brian Dodge is senior executive vice president, public affairs at the Retail Industry Leaders Association.