retail news in context, analysis with attitude

Fortune reports that Walmart, Target and Best Buy are among the major US retailers joining together to put "pressure on the Trump administration not to push its proposed so called 'border adjustment tax' on imports it says will cost everyday Americans hundreds of dollars a year."

According to the story, these retailers are part of a group of more than 100 that have created "the new Americans for Affordable Products group, which has the backing ... of the National Retail Federation and the Consumer Electronics Association and whose creation was announced on Wednesday. The group also includes food and beverage and automotive companies and trade organizations."

The target is not just a tax on products originating in Mexico, but a border adjustment tax (BAT) that would be imposed on all imports. "The BAT," writes. "is a part of the U.S. House Republican tax reform proposal, that would impost a 20% levy on imported goods. The tax, which aims in part to finance President Trump's proposed wall along the Mexican border could be particularly painful for retailers: Some 97% of all clothing and footwear sold in the U.S., and more than 90% of electronics, are imported. Items like sugar, coffee and many foods could also be hit."

The story goes on to say that "the Congressional Republicans' plan wants to eliminate tax incentives that spur American companies to move overseas, reduce the corporate tax rate to 20% from 35% with a view to spurring production in the US." But, retailers point out that they "cannot easily or quickly switch to domestic sources because they don't exist for many goods bought by U.S. consumers. The group estimates that if passed, the BAT will cost American households up to $1,700 a year . What's more, with soft sales at many chains and higher labor costs, many retailers' profit margins could take massive hits."
KC's View:
Some folks seem to think that for business, it'll all be a wash - that higher costs on products will balance out against higher profits that come about as a result of lower taxes. The question is whether this same sense of balance will be felt by consumers, or whether product prices will be offset by lower personal taxes.

While I'm as much in favor of lower taxes as the next guy, what always occurs to me is that while federal taxes may go down, my state and local taxes could go up ... the burden doesn't get eliminated just moved ... and still, ultimately, ends up on the consumer's back. In addition to the higher prices. And so while it might look like it'll all be a wash, I'm not persuaded that it won't affect retailers' bottom lines.