As the U.S. Senate pressed forward to pass the Republican tax reform plan, the National Retail Federation worked behind the scenes to let Washington lawmakers know it strongly backed the measure.
The NRF, which represents the retail industry from big box stores to Main Street merchants, said the legislation to rewrite the tax code would spur investment and relieve retailers of a financial burden. It wrote letters and blog posts this week pointing out that the Republican plan would reduce the corporate tax rate to 20 percent from 35 percent.
Just before 2 a.m, Saturday, the Senate voted 51 to 49 in favor of the measure, with Sen. Bob Corker (R., Tenn) as the lone Republican holdout, scoring President Trump a key political victory. No Democrats voted for the bill.
“The retail industry has borne the full brunt of the corporate tax rate,” David French, senior vice present of government relations at the NRF, said Thursday. The lower rate “will allow retailers the ability to grow, hire and expand.”
The NRF says retailers pay one of the highest average corporate tax rates. “Lowering the rate will help large and small retailers by allowing them to take the money they would have spent on taxes and plow it back into their business,” French said.
Retail analyst Simeon Siegel of Nomura/Instinet Equity Research in New York agreed that retail is heavily taxed. “Domestic-based retailers, in particular, would benefit from a lower corporate rate, as they do not enjoy the international tax breaks and pay the high rates,” Siegel said Friday. “Any reduction in the corporate rate would reduce the retailers’ tax load and put more cash in their pockets, which would provide a nice sense of relief amid the secular challenges they have been facing.”
The House approved its version of the tax legislation on Nov. 16 by a 227-205 vote.
While the $1.4 trillion tax bill proposes to slash corporate taxes starting in 2019, it would lower the rates paid by individuals and families only through 2025. It would also repeal a portion of the Affordable Care Act that sets up penalties if Americans don’t sign up for health insurance.
The Urban-Brookings Tax Policy Center, which provides independent analysis of current and longer-term tax issues, earlier this week questioned the promised tax break amount for middle-income families under the Senate bill.
“The Senate bill would cut taxes by an average of $1,300 in 2019,” wrote Urban-Brookings senior fellow Howard Gleckman in a Nov. 20 blog post. “But by 2027, after nearly all of the individual tax changes in the panel’s bill are scheduled to expire, the average tax cut would fall to just $340, and half of households would pay more than if Congress had never changed the law at all.”
Glickman added: “On average, higher-income households would get larger tax cuts than those with low- and moderate-incomes. But the averages mask those disparate and idiosyncratic effects.”
Both the House and Senate versions must now be reconciled and sent to President Trump to sign into law.