WASHINGTON — Retail chief executive officers raised their concerns about a proposed border tax on imports at a White House meeting with President Trump on Wednesday as the President pledged to cut regulations and simplify and lower taxes for businesses and families.
This story first appeared in the February 16, 2017 issue of WWD. Subscribe Today.
Ceo’s from Gap Inc., J.C. Penney Co. Inc., Target Corp., Best Buy, AutoZone, Jo-Ann Fabric and Craft Stores and Tractor Supply met with Trump to outline their job contributions to the U.S. economy and discuss the adverse impact they believe a border tax on imports would have, not only on their costs but also on consumer prices.
“Today, we had a positive and productive conversation with President Trump about the important role the retail industry plays in our national economy,” said Bill Rhodes, chairman, president and ceo of AutoZone, in a statement from the Retail Industry Leaders Association, where he is also chairman. “We stressed the importance of taking a thoughtful approach to tax reform for both individuals and corporations.”
Pointing to the 42 million U.S. jobs the retail industry provides as the country’s largest private-sector employer, Rhodes said the President “understands we support pro-growth policies that we believe will lead to greater domestic investment.”
“The group had a positive and substantive discussion about policies that would promote economic growth and job creation,” a Target spokeswoman said. “They also discussed the House of Representatives’ proposal for a border adjustability tax, which is a priority issue for Target because it will raise prices for American families on everyday essentials. If enacted, the House proposal would have profound implications for our guests and business. Target believes that anything that raises prices for families is not a good idea for America. Target looks forward to continuing the dialogue with the administration and Congressional members on this issue.”
Trump told the retail executives that in addition to reducing government regulations, his administration will reform the tax code by lowering taxes for middle-income families and corporations alike.
He said officials are crafting a “massive tax plan” that will be submitted in the “not-too-distant future.”
“Tax reform is one of the best opportunities to really impact our economy,” the President said. “It will be not only good and simpler, you’re talking about big numbers in savings.”
He also said his administration is “cutting regulations big league.”
“You have a very, very big regulatory problem and we are going take care of that because I want more jobs,” Trump said. “As you know, the overregulation costs our economy an estimated $2 trillion a year, which is incredible and it costs your businesses a lot of money, tremendous amounts of money and time.”
To that end, he told the executives that he has taken an executive action to create a permanent structure of regulatory reduction, one in which any federal agency that imposes a new regulation must also eliminate two others.
“That’s the least of it. But it’s an important symbol,” Trump said.
He also praised the executives for employing millions of people and said he will remain focused on job growth and bringing companies and jobs back to the U.S.
“There’s a lot confidence in our economy right now… You’ve been seeing that in the stock market, seeing that in businesses,” he said. “My administration remains very focused on the issues that will encourage economic growth. That’s what we’re all about. We have a lot of plants moving back into various states — Ohio, Michigan and Pennsylvania. We have a lot companies moving back in, coming back into the country and bringing the jobs with them.”
While neither Trump nor the retail executives openly discussed the border tax on camera or with reporters, officials requesting anonymity said it was a key topic of discussion with the President and in later meetings with House Ways and Means chairman Kevin Brady (R., Tex.) and other lawmakers.
The concept of a “border adjustability tax” or “border adjustment tax” (BAT) contained in a House GOP tax reform blueprint, has become a lightning rod in the private sector and on Capitol Hill.
Retailers have formed a coalition in opposition to such a tax, comprised of 120 businesses and trade groups, many of which were seated at the President’s table on Wednesday, and launched a campaign to prevent it from becoming law.
The BAT would essentially tax the value of imports but not the value of exports.
Currently, companies that import products can deduct the cost of the product, including materials and labor costs, when determining income taxes, according to industry officials. However, under the House GOP proposal, companies would not be allowed to deduct any of those costs on imported products.
U.S. companies, on the other hand, would be able to continue to deduct the cost of their products if made here and would only be taxed on the profit.
The National Retail Federation estimates that if such a tax were implemented in legislation, the BAT would cost families as much as $1,700. But there is also some question about whether retailers will be forced to absorb some of the costs on already thin margins associated with the tax.
Proponents of the tax, primarily House Republicans, argue that the border tax could be used to help pay for the sweeping legislative tax reform package that they are currently crafting. As part of that package, lawmakers have proposed lowering overall corporate tax rates to 20 percent from 35 percent.
While some experts have argued that retailers would not be hurt by a border adjustment tax because the U.S. dollar would strengthen and offset any increase in costs on imports, many are not convinced by that argument and maintain that the concept is untested and will have a disproportionate impact on companies that import most of their products sold to consumers in the U.S.
President Trump has floated the controversial idea of imposing a 20 percent tariff on imports from Mexico to pay for a massive border wall that he has ordered to be constructed.
It is unclear whether the retail executives got any clarity from Trump and where he stands on the House GOP’s proposed border tax.