Is Trump’s tax plan right for retailers and their customers?
Source: The White House

Is Trump’s tax plan right for retailers and their customers?

Groups representing retailers responded with support for the outline of a tax plan for businesses and individuals revealed by the Trump administration yesterday with the caveat that the final version should not include a border adjustment tax (BAT) supported by some Republican members of Congress.

“The United States has one of the highest corporate tax rates in the world, and retailers pay the highest effective tax rate of any industry,” said Matthew Shay, president and CEO of the National Retail Federation, in a statement. “Lowering the rate for businesses would significantly improve U.S. companies’ ability to compete in a global marketplace and will drive more investment to the United States.”

A statement issued by Retail Industry Leaders Association (RILA) followed the same theme. “Retailers pay among the highest effective tax rates of all U.S. businesses and provide jobs to more Americans than any other industry. Reform that substantially lowers the rates that retailers ultimately pay will generate job growth and benefit American families in countless ways.”

The Trump proposal would dramatically cut the corporate tax rate from 35 percent to 15 percent. What’s not clear is if deductions currently available to businesses will be eliminated.

The plan calls for individual tax brackets to be shrunk from seven to three: 35 percent, 25 percent and 10 percent. Standard deductions for individuals and couples would be doubled while deductions would be limited to mortgage interest and charitable contributions.

While many contend the plan will spur economic activity, it will also balloon the federal deficit.

The Committee for a Responsible Federal Budget, a non-partisan group that seeks to educate the public on fiscal policy said the Trump plan would cost the government $5.5 trillion in revenues over 10 years.

“Here is some real math: Debt is twice its historical average; higher as a share of the economy than any time outside of the World War II era and growing faster than the economy with no end in sight,” said Maya MacGuineas, president of the group. “Instead of banking on fantasy growth rates to offset debt-financed tax cuts, we should be pursuing sustainable economic growth to lift incomes and reduce budget deficits.”

BrainTrust

"We haven't been given a plan; we have a directional proposal filled with ideas and suggestions, lacking any true details."

Ricardo Belmar

Retail Transformation Thought Leader, Advisor, & Strategist


"Notwithstanding competing views on what the facts on this are, I suspect most would agree that lower taxes would be welcomed."

Mark Ryski

Founder, CEO & Author, HeadCount Corporation


"Importantly, the red flags go up for me when I hear an advocate of yesterday’s tax proposal use a phrase like “will probably.”"

Joan Treistman

President, The Treistman Group LLC


Discussion Questions

DISCUSSION QUESTIONS: What is your opinion of the proposed changes in business and individual taxes announced by the Trump administration? If enacted, would the plan be good for retailers and their customers?

Poll

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Mark Ryski
Noble Member
6 years ago

The proposed changes represent “notions,” not a plan. It’s factually true that the U.S. pays among the highest tax rates, and lowering them would be welcomed by all, including retailers. However, without any detail about how the cuts would be implemented and the consequences of doing so it is extremely problematic. There’s nothing wrong with the administration presenting a notional/directional tax proposal, but for this to be seriously considered (let alone enacted), it will require a considerable amount of analysis, consideration and deliberation.

Rick Moss
Reply to  Mark Ryski
6 years ago

Mark, on the point about our “highest tax rates,” I’ll just refer to the opposing argument as voiced in a blog post yesterday by Robert Reich: “The White House says the United States has one of the highest corporate tax rates in the world. Baloney. After corporate deductions and tax credits, the typical corporation pays an effective tax rate of 27.9 percent, only a tad higher than the average of 27.7 percent among advanced nations.”

Mark Ryski
Noble Member
Reply to  Rick Moss
6 years ago

Thanks for the additional context Rick. Notwithstanding competing views on what the facts on this are, I suspect most would agree that lower taxes would be welcomed.

Rick Moss
Reply to  Mark Ryski
6 years ago

No doubt.

James Tenser
Active Member
Reply to  Mark Ryski
6 years ago

This is a very succinct and accurate reading of the income tax cut proposal, Mark. It’s pointless to try and form an opinion about the percentage rate in the absence of specifics about corporate deductions, credits and other forms of taxation.

It is interesting to see how the RILA announcement declared opposition to the BAT or “border adjustment tax,” an import tariff embedded in the tax package by House Speaker Ryan to help offset lower income tax revenues.

The NRF wants tax reform, but it hates the BAT too. At last week’s Global Retailing Conference here in Tucson, AZ, NRF President and CEO Matt Shay and Chairman of the Board Mindy Grossman of HSNi declared its opposition to the new tariff, on the grounds that it would be “a real job killer” that would also raise consumer prices.

Who among us can remember a time when our historically conservative Washington D.C. retail trade associations declared opposition to a tax program proposed by the Republican leadership?

Cathy Hotka
Trusted Member
6 years ago

No hearings, no details and an apparent massive ballooning of the federal debt. Before scheduling hasty votes, let’s get a tangible proposal and get some facts about what it would do.

Max Goldberg
6 years ago

With the current Balkanization in Washington, I doubt that Trump’s tax plan will become reality. It’s a starting point for a discussion. Trump doesn’t really care about the end result. He’s just looking for a way to appear boldly active. In the end, whatever tax plan alterations are approved, he’ll claim it as a big win and move on.

Dick Seesel
Trusted Member
6 years ago

If the proposal announced yesterday is the beginning of a negotiation, it probably makes sense for the President to take the most aggressive position possible at the outset. But to turn this into a plan that can pass both the House and Senate is another story. The absence of a “border adjustment” tax is obviously good news for retailers (and consumers) but the lack of a revenue mechanism to offset the deficit impact of the tax cuts makes it a tough sell …assuming the GOP-controlled House still cares about that sort of thing.

As to the impact on consumers, this is harder to read: I think more affluent consumers living in states like Wisconsin might actually see their Federal taxes go up, if they can no longer itemize state and local taxes and the rise in standard deduction doesn’t offset it.

Finally, looking for sustained 3 percent GDP growth over 10 years is like looking for a blue-eyed unicorn: The flood of Boomers into retirement age is an impediment and so is the reality of the economic cycle. Wishing and hoping is not a strategy.

Gene Detroyer
Noble Member
Reply to  Dick Seesel
6 years ago

Oh, that blue-eyed unicorn! If we skip the politics and tax talk, the reality is that the U.S. middle class will decline from about 225 million today to about 200 million in 2030. It is all about the Baby Boomers retiring (and dying) and not being replaced by the new generation. With that kind of decline in the middle class, 3 percent is a dream.

Ricardo Belmar
Active Member
6 years ago

I’m reminded of what many successful sales people tell you they learned early on in their career — “hope is not a strategy!” While retailers would certainly welcome tax reform that lowers their overall taxes, we haven’t been given a plan, we have a directional proposal filled with ideas and suggestions, lacking any true details. Yes, it’s a fact U.S. businesses pay some of the highest tax rates, but that’s about the extent of the factual information we’ve seen so far. Hoping for phantom economic growth that’s not stimulated by anything tangible is not a strategy anyone can count on. Deficits and debt won’t go away just because we ignore them.

Joan Treistman
Joan Treistman
Member
6 years ago

It’s surprising to me that there isn’t more RetailWire team support for this proposal. I have many of the same concerns.

Importantly, the red flags go up for me when I hear an advocate of yesterday’s tax proposal use a phrase like “will probably.” Uhm, strikes me that there are too many guesses, no clear-cut answers regarding positive outcomes for the economy overall and individuals, but a whole lot of posturing.

I’m happy about tax cuts, but it would help to have a few illustrations with numbers for let’s say a business of 50 employees and $10,000,000 in revenue, a family of four with a household income of $75,000, etc. There’s nothing like an informed understanding with an informed opinion to start the discussion.

Craig Sundstrom
Craig Sundstrom
Noble Member
6 years ago

AM tasks:
1) pour morning beverage
2) ignore NRF rant….

As always “good” or bad” depends on the time frame: putting more money into people’s pockets is presumably always good for increasing consumer spending in the short run, but don’t those tax cuts have to be offset by government spending reductions somewhere else? (And unlike some people, I don’t think that every regulation or oversight is bad, so I’ve outgrown the “spurs growth” fable.)

More generally, if you’ve liked the past 36 years, you’ll probably like this (proposal), and if you haven’t, you won’t.