The tax reform bill has passed the full Senate, and is now queued up for reconciliation with the House version of the bill.
The general feeling so far surrounding the bill, is that it benefits big business and the rich, while leaving the middle class somewhat in the lurch.
For retail, however, leaders in the space are seeing a bright side that could have impacts as soon as this holiday season.
In a statement over the weekend welcoming the Senate’s passage of the tax reform legislation, the National Retail Federation said the “pro-growth plan” will help boost consumer confidence and even help pad their pockets in time for holiday spending.
“This vote couldn’t come at a better time,” NRF president and CEO Matthew Shay said. “Holiday shopping was strong throughout the Thanksgiving weekend, and a good part of the reason was optimism about the work Congress is doing to pass tax reform.”
It may be challenging to tell whether the average consumer was in fact calling up thoughts of Congress as they filled up e-carts with goodies priced at roughly 30 percent off on average, but Shay says consumers are starting to realize tax reform will mean more jobs, more money for the middle class and a boost for the U.S. economy.
“In fact, the savings is enough to give the average family a free Christmas,” Shay said, referencing the $967.13 average NRF expects consumers to spend for the holidays this year. “It’s time to get this legislation to President Trump so American consumers will know they can count on extra money in their paychecks come January.”
Others, however, aren’t so quick to sing the bill’s praises.
The bill—which passed the Senate in a 51-49 vote without a single “yay” from Democrats and one lone Republican “nay”—is expected to amount to a tax cut of nearly $1.5 trillion over 10 years. At the individual level, the Senate Finance Committee said the average American family of four earning $73,000 could see as much as $1,500 back in their paychecks each year, which, as The Hill opinion contributor Ned Ryun pointed out, might amount to little more than $25 to $45 a week.
“Sounds to me like a measly bribe to the voters in hopes they won’t notice the dump trucks of cash being poured into the pockets of the special interests and very wealthy,” Ryun wrote. “While the corporate tax rate needs to go down to make America’s business taxes more competitive globally, small businesses and the middle class—especially the upper middle class—are not nearly reaping the benefits in this bill that they should be.”
Both versions of the tax bill set to be reconciled include cutting the corporate tax rate from its current 35 percent to 20 percent, but the House and Senate bills have different ideas about when that break should start taking effect.
As such, companies’ tax burden should be expected to go down, but whether that holds entirely true—and to what extent they should see savings—will come down to the details in the legislation.
Other things, like a base erosion and anti-abuse tax, or BEAT, which bares some similarities to the highly maligned border adjustment tax (BAT), or a 20 percent excise tax on foreign imports from company subsidiaries, still have the potential to remain present in the tax reform.
[Read more about tax reform: What Will Tax Reform Mean for Retail?]
Either way, the tax overhaul is expected to provide a boost to the economy.
A survey of panelists’ expectations from the National Association for Business Economics (NABE) said U.S. GDP growth is projected to reach a moderate 2.2% for 2017, with a pickup to 2.5% in 2018, slightly higher than earlier forecasts. That growth, though, may owe little to tax reform.
“Most of the panelists expect both individual tax cuts and corporate tax reform will be enacted by the end of 2018,” Kevin Swift, CBE, chief economist for the American Chemistry Council, said. “However, only one-third of panelists expects an infrastructure spending plan will be enacted by then. The median estimate of the impact on real GDP growth from fiscal policy changes is an increase of 0.2 percentage point in 2018.”