Retailers have been waiting for details on President Donald Trump’s avowed plans for “big” tax reform, but it looks like the industry and the country at large will have to keep waiting for anything definitive.
Although the Trump Administration was expected to unveil its proposal for tax reform during a press briefing with Treasury Secretary Steven Mnuchin and National Economic Director Gary Cohn, the officials only offered “broad strokes” on reform ideas that are still mired in political negotiations.
It’s still unclear whether the controversial idea of a border adjustability tax — which would lower the base tax rate for companies but also impose an additional tax on imported goods — is off the tax table for good, but Mnuchin did say the administration wants the corporate tax rate cut to 15 percent from its current 34 percent.
Apparently baked into that proposal is something Mnuchin called a “territorial system.” When asked to clarify whether this was something akin to the BAT tax, the treasury secretary briefly explained it would see U.S. companies “paying income tax on income related to the U.S.”
“Its territorial, U.S. companies will not be subject to worldwide income tax as they have in the past,” Mnuchin added.
“Our basic premise here is to simplify the tax system and make it easy,” Mnuchin said later in the briefing after being asked repeatedly for more details on the reform proposal. “We don’t want to penalize people. We want it to be very fair.”
When a reporter attending the briefing alluded to the one-page, single-side print out of the reform proposal handed out before Mnuchin and Cohn’s remarks and asked when the White House would have a more detailed proposal to discuss, Mnuchin said “We’re moving as quickly as we can.”
“When we have an agreement, we’ll release the details,” he added.
Nevertheless, Mnuchin said the expectation is for a reform bill to be signed this year.
As for reforms to income taxes for individuals, Economic Director Gary Cohn said the White House is proposing a cut to all available deductions save home ownership and charitable giving, and bringing the available tax brackets down to three from seven.
Those three brackets would create a 10 percent, 24 percent and 34 percent tax rate based on income, but the associated levels of income have not been determined beyond a “broad view of where they’re going to be,” according to Cohn.
Matthew Shay, president and chief executive of retail lobby the National Retail Federation, said the group generally supports the idea that lowering corporate taxes will improve the economy by “helping grow business and industries in the communities where consumers live and work,” but still came down on the idea of a bigger import tax.
“The devil is in the details, but we are optimistic that when tax reform crosses the finish line it won’t include a border adjustment tax or any other scheme that shifts the financial burden to consumers,” Shay said. “Taxing imports would not only raise prices for consumers, it would ultimately cost American jobs and shutter American businesses. We look forward to continued conversations with the administration and Congress to make pro-growth tax reform a reality.”
During the White House press briefing, Mnuchin said Trump has more meetings with business leaders lined up this month to discuss tax reform, noting “one thing this President has done very well is listen.”
Not long after the press briefing, The New York Times reported that Trump “is likely” to sign an executive order withdrawing the U.S. from The North American Free Trade Agreement, citing a senior administration official.
During his campaign, Trump promised to renegotiate or withdraw from NAFTA, which allows the tariff-free flow of goods between the U.S., Canada and Mexico.
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