5 Principles for Meaningful Tax Reform

Pieter Brueghel the Younger Paying the Tax The Tax Collector oil on panel 1620 1640. USC Fisher Museum of Art

By Matthew Shay
President and CEO, National Retail Federation

There has never been a more promising—or critical—time for tax reform. Returning from the recess, Congress will be eager to move on from the bruising battle over healthcare. Leaders from both parties agree that tax reform is long overdue. But this also means failure would be disastrous for American businesses and consumers as well.

We know that all businesses want tax reform, but can we find clear, compelling principles that all stakeholders can agree upon to create a simpler, fairer, more competitive tax code that will grow the economy, create millions of good-paying jobs and put money back into the depleted pockets of American families?

Tax reform should be designed to lift the financial burden on hardworking American families, not increase it.

The last major overhaul of our tax system took place all the way back in 1986—over 30 years ago. Since then, America’s tax code has been saddled down with higher rates, additional brackets and more loopholes. Meanwhile, countries around the world have been cutting tax rates, putting the United States at a severe competitive disadvantage. 

Today, U.S. companies face a tax rate of nearly 39% compared to about 22% for the rest of the world. According to the non-partisan Tax Foundation, 75 countries have corporate tax rates below 20%, compared to just three countries that tax companies more than 35%. 

The opportunity now exists to get meaningful tax reform passed into law. But how can Congress and the Trump Administration bring together the diverse coalition of supporters they need to make tax reform a reality?  We believe there are five key principles that should guide tax reform as we move forward. 

1. Tax reform should be fair for all industries. Tax reform should not only lower rates, it should eliminate tax credits and incentives that favor some industries over others. This will free businesses to make the best decisions economically, rather than hiring more accountants and lawyers in a never-ending effort to try to game the tax code. Eliminating these tax credits will not only make the tax code fairer, it will also raise revenue and help to underwrite the projected “cost” of tax reform.

2. Tax reform needs to apply to all businesses regardless of operational form. Whether a business is a C-corporation or a pass-through, whether it owns or leases its stores, sells online or at brick-and-mortar locations, a business should not face a higher tax burden because of its operational decisions. This principle assures that companies will make organizational decisions based on what makes them grow and thrive, not how best to avoid taxes. 

3. Tax reform shouldn’t burden consumers. Forcing Americans to foot the bill for Washington spending every time they buy an article of clothing or the latest flat-screen TV will not spur economic growth. Tax reform should be designed to lift the financial burden on hardworking American families, not increase it. 

4. Tax reform should be permanent. To boost economic growth and job creation, businesses need certainty. That means tax reform should favor permanent changes over expiring tax credits or temporary tax provisions.

5. Tax reform should include an adequate transition period. Businesses, including millions of retailers, need time to plan for any changes to the tax code. Transitioning to a new tax code should be seamless, rather than disruptive. 

Many of these principles are already embodied in the tax reform plans circulating between Congress and the White House. We must build on these current plans and create ardent champions for tax reform among all American industries and businesses. 

Speaker Ryan warned that we can’t let this “once-in-a-generation” opportunity to transform our tax code “slip by.” By taking guidance from these clear principles, we can seize that opportunity to grow the economy and give consumers a much-needed boost.  

About NRF
NRF is the world’s largest retail trade association, representing discount and department stores, home goods and specialty stores, Main Street merchants, grocers, wholesalers, chain restaurants and internet retailers from the United States and more than 45 countries. Retail is the nation’s largest private sector employer, supporting one in four U.S. jobs – 42 million working Americans. Contributing $2.6 trillion to annual GDP, retail is a daily barometer for the nation’s economy.


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