Super Committee Action on e-Fairness and Tax Reform would Create Retail Jobs 

Super Committee Action on e-Fairness and Tax Reform would Create Retail Jobs

Arlington, VA – In a letter sent today to co-chairs of the Joint Select Committee on Deficit Reduction, the Retail Industry Leaders Association (RILA) urged the committee to address two issues of great importance to the retail industry, e-fairness and comprehensive business tax reform.

“Legislation that meaningfully addresses these issues would allow retailers to invest, grow, and most importantly, create jobs,” said the Katherine Lugar, executive vice president of public affairs in the letter to the Committee Co-Chairs.

The letter complements robust outreach to the committee and Congress at-large aimed at educating members on the importance of addressing these important issues.

Key Excerpts:

E-fairness: Fundamental Fairness for Main Street and Recognition of States’ Rights

“Main Street businesses need Congress to level the playing field between brick-and-mortar businesses and online only sellers. Moreover, as the Joint Select Committee fulfills its mandate to address the federal fiscal crisis, any changes that adversely affect the states can be mitigated by also granting the states the ability to enforce their sales tax laws. Accordingly, RILA strongly urges the Committee to include this authority, which bears no cost to the federal government, in its final legislative recommendations.”

Growth-Orient Tax Reform: Lower Business Tax Rates, Broaden the Base

“At the federal level, retail taxpayers typically have among the highest effective tax rates, hitting the top statutory rate of 35 percent in many cases. As you consider tax-reform options, one of the most far-reaching options that the Committee could endorse would be a reduction in the federal tax rates on business income.”

“RILA strongly supports a significant reduction in the tax rate applicable to U.S. corporations and other forms of business and a comprehensive effort to broaden the tax base in order to provide a simpler, permanent and stable tax system. We encourage the Committee to endorse this approach in its legislative package as a step toward improving the business climate for retailers, both domestically and internationally, which will help the retail industry continue creating jobs, investing in new equipment and technologies, and contributing to the nation’s long-term economic growth.”

RILA is the trade association of the world’s largest and most innovative retail companies. RILA members include more than 200 retailers, product manufacturers, and service suppliers, which together account for more than $1.5 trillion in annual sales, millions of American jobs and more than 100,000 stores, manufacturing facilities and distribution centers domestically and abroad.

Full Letter Text Below

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October 31, 2011

The Honorable Patty Murray The Honorable Jeb Hensarling

Co‐Chair, Joint Select Committee Co‐Chair, Joint Select Committee

on Deficit Reduction on Deficit Reduction

United States Senate U. S. House of Representatives

Washington, DC 20510 Washington, DC 20515

Dear Chairman Murray and Chairman Hensarling:

On behalf of the Retail Industry Leaders Association (RILA), I write as you near the deadline for the Joint Select Committee to release its legislative recommendations to reaffirm the importance of two critical issues for the retail industry – sales tax e-fairness and comprehensive business tax reform. We urge the Committee to address both these issues in your final recommendations. Legislation that meaningfully addresses these issues would allow retailers to invest, grow, and most importantly, create jobs.

By way of background, RILA is the trade association of the world’s largest and most innovative retail companies. RILA promotes consumer choice and economic freedom through public policy and industry operational excellence. Its members include more than 200 retailers, product manufacturers, and service suppliers, which together account for more than $1.5 trillion in annual sales, millions of American jobs and more than 100,000 stores, manufacturing facilities and distribution centers domestically and abroad.

E-fairness: Fundamental Fairness for Main Street and Recognition of States’ Rights

Because of a decades-old loophole that pre-dates the internet, online-only companies can achieve as much as a 10-percent price advantage over brick-and-mortar retailers by not collecting state and local sales tax. This special treatment has the effect of the government picking winners and losers in the marketplace, and local businesses simply cannot compete over the long term with online giants that have a competitive advantage based on government policy.

At the same time, the states are unable to collect billions of dollars in tax revenues already on the books -- an estimated $23 billion in 2012, and a figure that will only grow as e-commerce continues to expand. Fundamentally, the states should be able to enforce their laws, regardless of whether a product is purchased from an in-state or out-of-state vendor, and collect state revenues essential for dealing with their own fiscal crises.

Ultimately, Congress has the authority to close this loophole, which would level the playing field for Main Street businesses and provide self-help to the states. Several bills are now pending in both Houses that accomplish those goals. Earlier this month, Cong. Steve Womack (R-AR) and Cong. Jackie Speier (D-CA) introduced the Marketplace Equity Act (H.R. 3179), which would encourage all states to simplify their sales tax laws and assist remote sellers with compliance, while recognizing the importance of not burdening small businesses. In the Senate, Sen. Mike Enzi (R-WY), Sen. Dick Durbin (D-IL), and Lamar Alexander (R-TN) are readying a similar bipartisan approach.

Main Street businesses need Congress to level the playing field between brick-and-mortar businesses and online only sellers. Moreover, as the Joint Select Committee fulfills its mandate to address the federal fiscal crisis, any changes that adversely affect the states can be mitigated by also granting the states the ability to enforce their sales tax laws. Accordingly, RILA strongly urges the Committee to include this authority, which bears no cost to the federal government, in its final legislative recommendations.

Growth-Orient Tax Reform: Lower Business Tax Rates, Broaden the Base

The retail industry is vital to our nation’s economy, representing one of the largest industry sectors in the United States with nearly 15 million jobs and $3.9 trillion in annual sales overall in 2010. The industry pays billions of dollars in federal, state, and local income taxes. At the federal level, retail taxpayers typically have among the highest effective tax rates, hitting the top statutory rate of 35 percent in many cases. As you consider tax-reform options, one of the most far-reaching options that the Committee could endorse would be a reduction in the federal tax rates on business income.

Today, the United States has nearly the highest statutory tax rate on corporate income, which has a number of significant ramifications for U.S. retailers. Overall, high corporate taxes reduce the availability of critically needed capital for business to invest in their workforce. Studies have shown that a significant share of corporate taxes is borne by labor. Thus, a reduction in the tax burden will free companies to create new jobs, increase real wages and income, and improve standards of living for U.S. workers. With the unemployment rate hovering around 9 percent nationally, this is a critical opportunity for Congress to reverse the job losses that have occurred over the past several years.

Moreover, our current high corporate tax rate hinders retailers’ ability to maintain their existing operation and invest for the future. Especially in the current economic environment where the flow of private-sector capital has been constrained, a lower tax rate would free up essential corporate earnings for investments in new equipment, facilities and products. Similarly, it would enable retailers to retain more of their earnings to reinvest for the long-term growth of their companies, which will contribute to nation’s economic recovery and ultimately to sustained economic expansion.

RILA strongly supports a significant reduction in the tax rate applicable to U.S. corporations and other forms of business and a comprehensive effort to broaden the tax base in order to provide a simpler, permanent and stable tax system. We encourage the Committee to endorse this approach in its legislative package as a step toward improving the business climate for retailers, both domestically and internationally, which will help the retail industry continue creating jobs, investing in new equipment and technologies, and contributing to the nation’s long-term economic growth.

In closing, we appreciate the extraordinary effort that you and the Committee members have undertaken to address the serious fiscal situation facing this country. And, we thank you for considering the view and recommendations set out above. RILA and its members look forward to working with Congress to enact meaningful deficit-reduction legislation, including provisions for e-fairness and tax reform, that supports the retail industry and help it to continue to create jobs and grow.

Sincerely,

Katherine G. Lugar