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Today, retailers across America are letting President Trump and the Republicans in government leadership know that they won’t watch quietly as a potentially damaging tax plan takes shape.
More than 100 companies, including Abercrombie & Fitch, Nike, Gap, Target, Hudson’s Bay Company, QVC, Levi’s, LVMH, and Neiman Marcus, are joining forces to create Americans for Affordable Products, a coalition that will rally against the Border Adjusted Tax (BAT) plan.
While still in the works, the tax plan would implement higher taxes on imports to encourage more production in the US, as well as discourage companies from moving their bases overseas for the lower tax rates then selling stuff back to the US. It would also make exports and profits earned overseas tax-exempt.
Retailers have been headed to Washington for months now to rally against it; this new coalition is the next step.
“Under the BAT, a U.S. large company may virtually pay no corporate taxes simply because it exports products, while another American company delivering affordable essentials to their consumers will be faced with crushing taxes simply because many of these essentials must be imported,” reads a statement from the AAP today. “This means higher prices for everyday goods that Americans purchase, and taxpayer subsidies for products sold abroad. The Border Adjustment Tax is a trillion-dollar tax break for a few corporations.”
Rachelle Bernstein, vice president and tax counsel at the National Retail Federation, tells Racked this coalition has been in the works since November, when Trump won the election and retailers across the country realized how harmful the tax plan could be. (The BAT is different from the simpler “big border tax” Trump’s been talking about for the past week, which many CEOs are opposed to, too.)
The damage could come in various forms, most notably in raising prices for consumers. Companies will have to absorb the tax somehow, and Bernstein notes that many speciality retailers, like a Gap or an Abercrombie, import up to 90 percent of their products — imports that would no longer be tax-deductible under the BAT.
This would result in a higher tax bill, “which would be several times larger than their profits, something retailers won’t be able to absorb,” Bernstein says. The fallout could mean stores shuttering, layoffs, or higher prices.
The way the AAP explains it, “the Border Adjustment Tax, under consideration in Congress today, slaps outrageous taxes on imported goods — like clothing, food, medicine, and gasoline — products Americans rely on every day.” It adds the new plan could mean American families spending an additional $1,700 annually.
“A large segment of retailers are hurting right now, and this is an industry that’s in middle of trying to reestablish itself,” she says. “Traditional retailers are in a weaker position than they’ve been. To, on top of that, move to the BAT would hurt it more. Because when prices go up, consumers will have less in their pockets to spend, and it’ll exacerbate the situation. I think we’ll see some positive results from retailers moving to adapt, but this is not a good time to put a burden on them.”
Other sectors outside of retail, like gasoline and groceries, are a part of the AAP, but Bernstein said it’s largely been the retail industry that’s been spearheading the issue (you can see the full list of companies that are a part of the coalition here). While the tax plan isn’t yet law, Bernstein said the 100+ retailers felt they “knew enough about the plan to know its general impact on imports.” And the clock is ticking, since Trump is pushing to expedite the timeline.
Marketing taglines from the AAP include “Don't let the things you need get up to 20% more expensive,” and the coalition’s agenda includes encouraging supporters — a.k.a. shoppers — to reach out to their congressional representatives. (Bernstein says no one from the AAP has officially been in touch with the president or his cabinet yet.) They are also creating education material for consumers to understand its effects, since this stuff, like all things tax-related — and Trump-related — is confusing.