A group of retail CEOs is reportedly in Washington today to meet with the architects of the plan. The companies represented include Target Corp., Best Buy Co Inc. and Gap Inc., according to Reuters.
The border adjustment tax would lower corporate taxes from 35 percent to 20 percent while imposing a tax on the cost of goods sold on imports; export revenue would be exempt.
With 97 percent of the apparel in the U.S. made overseas, the apparel industry is leading the charge against the tax overhaul along with other consumer products industries.
“Given that retail is the largest private sector American employer, retailers support sound policies that spur economic growth and job creation,” said Brian Dodge, senior executive vice president of public affairs at the Retail Industry Leaders Association, in a statement. “Later this week, several top retail executives will visit Capitol Hill to meet with lawmakers and discuss pro-growth policies that will benefit both American consumers and job creators.”
As the debate continues at home, the European Union has indicated that if the new tax is enacted, it will challenge the U.S. over World Trade Organization violations.
The Financial Times reports that Jyrki Katainen, the European Commission vice president over EU trade policy, said both the border adjustment tax or the President’s proposed tariff hikes would trigger a response.
“If somebody is behaving against our interests or against international rules in trade then we have our own mechanisms to react,” Katainen told the paper. “We have all the legal arrangements within EU, but we are also part of global arrangements like the WTO and we want to respect the global rule base when it comes to trade.”
It’s unclear where the Donald Trump stands on border adjustment. He has been vocal about his opposition to the plan but subsequent comments from the White House could be read as at least lukewarm support.
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Katainen said a trade war would be “disastrous” for the world economy, but that’s exactly would could happen if countries enact retaliatory tariffs against the U.S.
Companies like Dillard’s, Inc., Belk, Inc., J.Crew Group, LVMH, Abercrombie & Fitch and Nike are among the 100-plus members of the Keep America Affordable coalition, which says the resulting taxes from the proposed legislation would ultimately force them to increase retail prices for the American public. The group estimates it would cost U.S. households as much as $1,700 per year.
Meanwhile, 21 companies in favor of the plan have rallied around the American Made Coalition, which asserts tax reform is needed and this would create a level playing field for U.S. businesses. The group’s site says: “A focused public campaign – one supporting competitive tax rates for small and large business, a modern territorial system, and the border adjustment of businesses taxes – is urgently needed to achieve success.” Firms publicly supporting the effort include Caterpillar Inc., The Dow Chemical Company, GE, Honeywell, Johnson & Johnson, Oracle, Pfizer, Raytheon Company.
Ultimately tax reform will fall under the umbrella of the newly appointed U.S. Treasury Secretary, Steven Mnuchin