The U.S. currently has a once in a generation opportunity to enact tax reform. But will Congress get it done? What does meaningful reform look like for consumers and retailers? We recently sat down with RILA's Executive Vice President of Federal Government Affairs Jennifer Safavian to talk about the outlook for reform in the 115th Congress and what's at stake for America's retailers. Read our full Q&A below.
Q. Why is getting tax reform done in this Congress so important to the retail industry?
JS: The retail industry has such a vast impact on the U.S. economy. We are the nation's largest private sector employer, providing opportunity to more than 42 million Americans directly or indirectly. We are also a key economic driver, producing $3.2 trillion in sales annually. In addition, retail consumer spending represents two thirds of U.S. GDP.
Unfortunately, the retail industry currently pays the fourth highest effective tax rate among all major U.S. industries, and one of the highest effective tax rates in the world. This prevents our companies from being competitive globally and diminishes economic growth here in the U.S.
It's been over three decades since comprehensive tax reform has been achieved. Lowering the effective tax rate would allow us to invest more in communities, hire more Americans, and continue our positive impact on the economy.
Q. Will the industry be supportive of the tax reform process in Congress?
JS: Most definitely, yes. The retail industry has always been supportive of comprehensive tax reform that will help us continue to grow and create jobs and provide our customers with the goods and services that they need and want. Retail will continue to voice our expectations with lawmakers and are hoping to be at the table as legislation is being drafted and we want to help promote the need for tax reform.
Q. In a perfect world, what does tax reform look like for retailers?
JS: The retail industry would like to see substantially lower rates for our customers and all taxpayers. We would like to see the elimination of special preferences that give some companies advantages over others. The tax code needs to be simplified and we would want to see a territorial tax system so U.S. companies can be globally competitive.
Q. As a former staff director of the House Ways and Means Committee, you have unique insight into how the committee of jurisdiction for tax reform operates. How do you think the Committee currently views this opportunity for tax reform and what do you think the probability is that they will get it done?
JS: I think members of the committee see the need to reform the tax code and are anxious to do so. I believe they view this as the best opportunity they've had in some time to get it done. Everyone needs to understand it's not an easy task and it's a lengthy process to rewrite the entire tax code. There is a lot to be done and they have their work cut out for them, but I know they've been diligently working on it and the House, Senate, and Administration have agreed on the principles, which is a step in the right direction and is encouraging. The goal is the end of the year; we'll have to see if they can get there. We hope they can.
Q. Now that Congress is back and is publicly beginning work on enacting tax reform legislation, what role does RILA and the industry plan to play in getting things across the finish line?
JS: RILA and the retail industry as a whole are very supportive of getting tax reform done. We want to be active participants in drafting and will be continuing discussions on the need for tax reform with members of Congress and the public in the coming months. Our member companies and tax executives have been very active in pushing for tax reform that eases the burden on consumers and levels the playing field for businesses, meeting with the President, Vice President and many members of the Administration and Congressional leadership. With BAT off the table, retailers look forward to continuing our work with the Administration and congressional leadership to pass a tax reform plan that is fairer, flatter, and less burdensome for retailers and American families.