Dive Brief:
- Retailers and import-reliant manufacturers are nervous about an upcoming tax code overhaul that, while reducing the U.S. corporate tax to 20%, would institute a new tax on imports.
- Companies such as Gap will be particularly hard hit by the border-adjustment style tax, which could, for example, raise taxes on a single sweater from $1.75 to $17, CNBC reports.
- The new tax system is meant to encourage American production, though experts cite a lack of available skills and facilities make this unlikely.
Dive Insight:
The debate over a new tax proposal, promoted by House of Representatives by Ways and Means Committee Chairman Kevin Brady and designed to improve the balance of trade in the U.S., is far from over, and multiple businesses are caught in the crossfire. Given the nature of how retailers, for example, sell products domestically, the tax proposal could lead to massive increases in tax per item, creating a crippling effect on sales pricing and beyond.
On December 13, groups representing various retail and manufacturing industries sent a letter to Brady to argue that companies who are built on a global supply chain are not equipped to deal with this aggressive rise in taxes and increased cost of goods. The ramifications would be far-reaching, impacting the sale of goods, reduced work force, and limits in opportunities in capital investment.
However, Brady is not backing down. He continues to state that his border adjustable plan is here to stay, but that, according to C-SPAN, he is willing to "listen to and find solutions with those who rely a lot on imported goods." That said, Brady remains steadfast that this tax policy adjustment is necessary to balance U.S. trade interests, and that "industries will have to adjust."
