NEW YORK, 2017-Jan-19 — /EPR Retail News/ — The National Retail Federation applauded a warning from Federal Reserve Bank of New York President and CEO William Dudley today (January 17, 2017) that a border adjustment tax would have “unintended consequences” for American consumers.
“Mr. Dudley and retailers are in agreement: a border adjustment scheme would be a risky experiment for the American economy,” NRF Senior Vice President for Government Relations David French said. “Economic theorists are playing with fire and it’s the consumer who ultimately will lose.”
“We are pleased to hear Mr. Dudley voice his support for corporate tax reform,” French said. “The best way to grow our economy is for Congress to lower tax rates for all businesses, not pick winners and losers.”
In a keynote session at NRF’s Retail’s BIG Show this morning, Dudley was asked about his views on the border adjustability provision in the “Better Way” tax reform plan proposed by House Speaker Paul Ryan, R-Wisc., and Ways and Means Committee Chairman Kevin Brady, R-Texas.
“That type of adjustment proposal in the House, it’s a pretty dramatic change,” Dudley said. “I think that it will probably lead to a lot of changes in the value of the dollar, the prices of imported goods in the U.S. I’m not sure that that would all happen very smoothly and I also think there could be lots of unintended consequences.”
“I’m not of the view that import prices would go up 10 percent and the dollar would appreciate by exactly 10 percent so that the value that retailers pay for the imported goods would be exactly the same in dollar terms.”
“I’d like to see corporate tax reform and I’d like to see something that does reduce some of the distortions that occur, but I want to see something I think that is probably a little less dramatic.”
The border adjustment provision of the plan would, in effect, create a border tax on imported goods by ending retailers’ ability to deduct the cost of merchandise that they import. That means retailers would be taxed at nearly the full selling price of imported merchandise rather than just their profit.
That would have significant implications for retailers and other industries that import goods into the United States, including automobiles, technology, food and fuel. Analysis by NRF and many of its member companies indicates that the proposed tax would drive up costs, erode profits and exceed any benefits from a lower corporate tax rate. It would require price increases of up to 15 percent to retain profitability, effectively creating a new tax paid by consumers.
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. Retail is the nation’s largest private sector employer, supporting one in four U.S. jobs – 42 million working Americans. Contributing $2.6 trillion to annual GDP, retail is a daily barometer for the nation’s economy.
Contact:
Robin Roberts
press@nrf.com
(855) NRF-Press
Source: NRF