NRF slams modified proposal to phase-in tax on U.S. imports

The nation's leading retailer trade group rejected a modified proposal by House Ways and Means Chairman Kevin Brady (R-Texas) calling for a five-year phase-in of a border tax on U.S. imports, saying a gradual end to the status quo does nothing to mitigate the damage from dramatically higher retail import prices.

The original proposal exempts U.S. exporters from taxation but ends companies' ability to deduct their import costs, effectively taxing retailers on the full selling price of imported merchandise rather than just their profits. The modified language proposed by Brady would end deductions on 20 percent of import costs during the first year. The non-deductible portion would increase steadily until it reaches 100 percent in the fifth year.

In a statement yesterday, David French, the National Retail Federation's (NRF's) senior vice president for government relations, said a phase-in period won't make the proposal "any less harmful to millions of American workers." Retailers could still see their tax bills rise to 3 to 5 times the amount of their profits, and it would force many to hike selling prices by 15 percent or more just to try to stay profitable. Many retailers could be forced out of business, and American consumers would be hit with a new and sizable tax, NRF said. Smaller retailers would be the hardest hit, according to the group.

French called on Brady to drop his proposal and advocate instead for a broad-based cut in the corporate tax rate to 20 percent from the current 35 percent.

The initial proposal, first made in mid-2016 by Brady and House Speaker Paul D. Ryan (R-Wis.) did not call for a phase-in period. The original proposal has met with widespread criticism, and Brady floated his modification amid concerns that a wholesale shift would wreak widespread havoc on U.S. companies, consumers, and the broader economy.

The so-called Border Adjustment Tax is a component of broad tax reform legislation advanced by Brady and Ryan.