The National Retail Federation (NRF) urged the House tax-writing committee to consider small retailers and their employees when reforming the nation’s tax code, saying they would suffer more than large companies under a proposal to create a border adjustment tax (BAT) that would drive up the price of imported merchandise.
“Small retailers are probably the business group that is hardest hit by the potential impact of the BAT,” said NRF Senior Vice President for Government Relations David French. “They do not have the economies of scale to be able to reduce the higher costs of their merchandise with the BAT imposed and are most likely to lose sales to lower-priced competition. We hope to work with you toward an alternative to the BAT and protect small retailers and the almost 17 million jobs that they contribute to the U.S. economy.”
French’s comments came in a letter to the House and Ways and Means Committee, which is holding a hearing today on how tax reform would benefit small businesses, grow the economy and create jobs. NRF has led the retail industry in advocating for comprehensive tax reform that would broaden the tax base and lower the rate.
French said the 20% BAT that would be created under the “Better Way” tax reform plan proposed by House Speaker Paul Ryan (R-Wisconsin) and Ways and Means Committee Chairman Kevin Brady (R-Texas) would effectively move the United States toward a consumption tax structure rather than the current income tax structure.
“Our small retail members are very concerned about tax reform efforts that might shift the burden of taxation to consumption,” he said. “Increased costs to the consumer will cause sales to decline and result in a contraction in their businesses.” Instead, Congress should reject the BAT proposal and focus on reform of the existing income tax system, he said.
“Our retail members believe that a reform of the income tax, by providing a broad base and low rates, will bring the greatest economic efficiency and simplicity to the federal tax system,” French said. “These changes will lead to greater investment, more jobs and greater economic growth.”
A recent NRF survey of small retailers found that three out of five expect a negative impact on their businesses if the BAT is enacted, and 18% said their businesses could fail. More than 200,000 jobs could be lost to layoffs and wages could be reduced by close to $500 million because of reduced hours for employees. Small businesses make up 98% of the retail industry and provide 40% of its jobs.
The BAT provision would end importers’ ability to deduct the cost of merchandise purchased from other countries, resulting in higher prices for consumers. NRF estimates this could cost the average family as much as $1,700 a year.
NRF is the world’s largest retail trade association, representing discount and department stores, home goods and specialty stores, Main Street merchants, grocers, wholesalers, chain restaurants and internet retailers from the United States and more than 45 countries.