Proposed Tax Reform Could Cost Retailers Big
The Republican House Ways and Means Committee’s “A Better Way” tax reform proposal can affect retailers in a big way. The plan, proposed in June, is complex, but CNBC breaks it down into three major pieces. First, the law would institute a 20 percent corporate tax — decreasing it from the current 35 percent. Second, it would allow for the immediate expense of business investments, instead of over time as it is now. Both of these are likely welcomed by retailers, however, it’s the third piece to the law that's worrisome for the industry. The law calls for a border-adjustment tax for goods that are imported. The tax is aimed at encouraging more manufacturing in the U.S., as well as raising government funds.
Total Retail’s Take: About 95 percent of the apparel and shoes sold by retailers in the U.S. is manufactured and imported from overseas. If the GOP plan is adopted in its current layout, the tax on a $100 sweater imported from overseas will go from $1.75 to $17. To combat this, retailers will have to raise the prices on products, and that’s not a favorable solution for either party.