Paul Ryan

In a letter to Congress today, chief executive officers from some of the largest U.S. manufacturers urged elected officials to pass tax reform as proposed by House Speaker Paul Ryan.

The plan includes “border adjustability” that would tax U.S. imports and exempt exports. The letter was from a group of companies that founded the American Made Coalition (AMC) earlier this month, and is in opposition to efforts by retailers such as Gap Inc. and Target Corp. — which are part of the Coalition for Affordable Products (CAP).

“We recommend enacting comprehensive pro-growth tax reform to remove a major impediment to economic growth — our outdated tax code,” the AMC stated in its letter. “We have the highest business tax rate in the developed world and are one of the few countries that taxes business income on a worldwide basis.”

The AMC described a border adjustment tax (BAT) as a “critical element” of Ryan’s plan, and said it “ensures goods and services produced abroad face the same tax burden as those produced in the United States.” Chairmen and chief executive officers who signed the letter hailed from companies such as The Boeing Co., Dow Chemical Co., GE, Oracle Corp., Pfizer and Caterpillar Inc., among others.

Last week, retail ceos from the CAP met with elected officials to express their concerns over the impact of a BAT on consumer spending. Simultaneously, President Trump has said he’s working on a tax reform plan of his own that would reduce the burden of U.S. households.

Carol Lapidus, partner and national leader for the consumer products industry, at RSM US, told WWD this week that there are still a lot of unanswered questions about any proposed tax reform. “With the [BAT], the specifics really are not there yet,” she said. “There’s been a lot of back and forth regarding how it will be structured.”

Lapidus said if passed, a BAT “is going to have a significant impact on the fashion apparel and luxury market.” She noted that even if there is a reduction in household income taxes — as Trump proposes — it will not likely offset the effect of a BAT on prices.

“Consumers may end up with more money in their pocket, but we’re taking a leap in faith to think that the consumer is willing to pay more at retail,” Lapidus said.

She also noted that brands and retailers have other options instead of passing along higher prices to consumers. “They can focus on making supply chains more efficient, and by getting better prices on goods sourced. Or by looking to make significant reductions in overhead,” Lapidus added.


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