A proposed 20 percent import tax — dubbed the border adjustment tax — continued to be a source of contention among retail executives and lawmakers at a hearing on Capitol Hill today.
Target chairman and CEO Brian Cornell and former Walmart U.S. president and CEO William Simon shared opposing views on the new tax, which has been widely opposed by the retail industry, including the National Retail Federation and trade organizations the Footwear Distributors & Retailers of America (FDRA) and the American Apparel & Footwear Association (AAFA).
At today’s hearing before the Ways and Means Committee, Target’s chief prefaced his testimony by noting that he believes the current tax code is “broken” and that “the status quo is unacceptable.” However, he went on to say the BAT would take a significant toll on American families.
“Under the new border adjustment tax, American families — your constituents —would pay more so that many multinational corporations would pay even less,” he said. “85 percent of Americans shop at Target every year. We believe this new tax would hit families hard, raising prices on everyday essentials by 20 percent.”
He added, “I can’t sign up for a plan that would stick American families with that bill or double their tax rates — a plan that would stifle our investment in America.”
Conversely, Walmart’s former U.S. chief saw potential upside to the BAT, if “properly implemented.”
“I have weighed the considerable challenges this proposal presents to retail with the significant benefits it will deliver to the economy as a whole, and have concluded that properly implemented, it is in the best interest of our country for this to be considered,” Simon said. (Walmart, now helmed by CEO Doug McMillon, has publicly spoken out against the BAT.)
Simon suggested that he believed the tax could meet its intent of boosting domestic manufacturing jobs.
“Manufacturing jobs in the country — and around the world — have always represented a pathway to the middle class,” he explained. “There’s a reason the middle class has struggled in this country recently, and it’s the same reason we’ve seen middle classes emerge in global markets. And that is because the manufacturing base has moved, and with it the jobs have fallen.”
Simon’s views, however, are generally at odds with those of the retail industry.
In comments submitted to the Ways and Means Committee ahead of today’s meeting, the AAFA reinforced its opposition to the BAT provision included in the House Republicans’ “A Better Way” tax blueprint. Most notably, the organization said the tax would have a “massive inflationary impact” on the fashion industry and “trigger devastating job losses.”
“With approximately 98 percent of all clothes and shoes imported, a border adjustment that eliminates the ability to deduct the cost of imported goods sold from income tax calculations would translate to an additional 20 percent (or 25 percent in the case of pass-through corporations) tax on clothing and shoes,” the AAFA wrote in the comments. “With an industry that faces low margins, especially on lower-priced products, this tax would pass through to the consumer – raising prices by as much as 20-25 percent.”
Following the hearing, FDRA president and CEO Matt Priest expressed similar concerns about the controversial tax, referring to the BAT as a potential measure that is “based on academic theory, not real world experience.”
“We are deeply concerned that House leaders continue to advance the controversial BAT that would hit consumers with a $1.2 trillion tax hike and drive up shoe prices for working-class individuals and families,” Priest said. “As Target CEO Brian Cornell made clear to the committee in his testimony today, the BAT will harm American consumers and create uncertainty for American businesses that we rely on for job creation … FDRA stands ready to work with Congress on tax reform that will grow our economy, but we reject the idea that Congress should lower corporate rates by imposing a new BAT tax on everyone who buys and sells shoes.”