Local retailers are closely watching the machinations of Washington D.C.’s tax reform decisions, and one item in particular is of grave concern.
The border adjustment tax, proposed by U.S. House Speaker Paul Ryan, R-Wisconsin, and Ways and Means Chairman Kevin Brady, R-Texas, is the short name for a destination-based cash flow tax — a tax levied on imported goods. For local Utah County retailers and suppliers that means adding an extra cost to their products.
James Greaves, CEO of Brand Makers in Spanish Fork, is one of those retailers. His company provides promotional and branding products to various organizations across the United States. The majority of Brand Makers’ products are imported from China. He believes the border adjustment tax will limit small businesses, and will ultimately send America backwards.
“The idea behind it – to tax goods made overseas and brought here – is that it will promote job creation here in the U.S. But there is a reason we make products overseas – they are cheaper and Americans don’t necessarily want those low-wage factory jobs here,” Greaves said. “America has moved away from factories full of people making simple items, and on to service and technology jobs.”
Brand Makers employs about 40 people locally, and Greaves said many of those workers’ jobs would be in jeopardy if the border adjustment tax passes.
“Yes, we make our product overseas, but the jobs here are ancillary around that one part – they are jobs in marketing, finance, design and sales. Those jobs would be threatened if we’re not able to make our product,” Greaves said.
Greaves is not the only local small business fighting the tax. Chandler K. Erdei, owner of Barrett’s Foodtown, a grocery store in Salina, recently released his own statement during the U.S. House Ways and Means Committee hearings.
“The border adjustment tax will be devastating to my business,” he said. “If passed, I would have to significantly scale back business or potentially consider shutting down completely. It would also be a burden on my household as this would significantly increase the cost of items we use every day. I hope that the Ways and Means Committee will not allow this proposal to move forward.”
These men are just two of many local business owners that are part of a coalition, Americans for Affordable Products, which is united in the battle against higher consumer prices.
“The border adjustment tax is a slap in the face to the American people. A 20 percent cost increase for businesses like mine will be destructive and comes with severe consequences. Costs for daily necessities would have a dramatic increase and slow economic growth,” said Joe Maughan, owner of 9th & 9th Jewelers in Salt Lake City, in a statement.
Just this week, U.S. House Budget Chairman Diane Black denied a last-minute attempt Wednesday night by Mark Sanford, R-South Carolina, “to preemptively bar the GOP from considering a border adjustment tax this year,” according to an article by Sarah Ferris at Politico. The attempt came during the House panel’s approval of a fiscal plan that some say is paving the way for Republican tax reform.
At the same time, the National Federation of Retailers wrote a letter to the U.S. House Ways and Means Committee, urging them to reject the border adjustment tax.
“The solution for reducing the corporate tax rate should not be to shift the tax burden to individuals and families through the imposition of a consumption tax,” wrote David French, NRF senior vice president. “Since the overall purpose of pro-growth tax reform should be to improve the standard of living of the American people, it would be counterproductive to include a consumption tax in that plan.”
Greaves echoes that sentiment, because small and medium businesses will see no benefit.
“Most businesses are small businesses and don’t pay a corporate tax. We’re not affected by the corporate tax cut, but we’d be affected by the BAT tax,” Greaves said.
The border adjustment tax is still on the federal table, so he and his fellow business leaders with the Americans for Affordable Products, will be watching it carefully.
Karissa Neely reports on Business and North County events, and can be reached at 801-344-2537 or firstname.lastname@example.org. Follow her on Twitter: @DHKarissaNeely