Wal-Mart, Target, NRF lead retail industry coalition to fight border adjustment tax

Dive Brief:

More than 120 retailers and trade organizations have launched Americans for Affordable Products, a national coalition to fight a Republican-proposed 20% border adjustable tax on imports.
Key industry leaders including Wal-Mart, Target, Nike, the National Retail Federation and the Retail Industry Leaders Association have joined the campaign, which argues that such a tax would result in increased prices for consumers.
“[T]he border adjustable tax is harmful, untested, and would put American retail jobs at risk and force consumers to pay as much as 20% more for family essentials,” RILA President Sandy Kennedy said in a statement emailed to Retail Dive.

Dive Insight:

Last week, Target CEO Brian Cornell headed to Washington D.C. to meet with members of the House Ways and Means Committee, while executives from Best Buy met with members of Congress to show them how the proposed tax would would flip the electronics retailer’s annual $1 billion net income into a $2 billion loss. Yet there is power in numbers and a coalition of more than 120 industry leaders, many from notable big-box companies, may give retailers a better chance of having their voices heard.

But retailers argue the tax isn’t just about them: It’s about consumers. For example, retailers would no longer be able to deduct the cost of merchandise they import under such a plan, hiking taxes three to five times higher for some merchants and driving up the price of imported goods, according to the NRF. Even many retailers that don’t import directly would experience higher costs as wholesalers pass on their own inflated costs, and it would be difficult for retailers to substitute American-made goods because so much of their merchandise is made overseas, the NRF says.

“Consumers shouldn’t bear the burden of this new tax while some corporations get a tax break,” reads the coalition’s mission statement. Observers also warn that the border adjustment tax could more broadly hurt the economy as consumers face higher prices, retailers’ profits shrink and trade wars erupt. Beyond the impact on consumers, retailers have voiced concern over President Donald Trump’s plan to use the border taxes as a financing mechanism to pay for a wall on the U.S. border with Mexico, a construction project that could cost some $20 billion.

While retailers adamantly oppose the border tax, it comes in tandem with talks to lower corporate taxes from 35% to 20%, and retail trade organizations have been lobbying Congress for such comprehensive tax reform for years. “The retail industry pays among the highest effective tax rates of all industries. We, therefore, enthusiastically support reforming the current tax code and welcome the fact that both the President and Congress do so as well,” RILA’s Kennedy said.