The United States has the highest corporate tax rate in the world. While other countries have lowered rates in recent years, the United States has stayed firm at 35 percent, prompting some U.S. companies to move jobs overseas and deterring foreign companies from investing. The average corporate rate for most major industrialized nations is 25 percent, and some countries have dramatically lower rates – Ireland, for example, cut its levy to 12.5 percent to attract foreign investment. In addition, the U.S. tax system is riddled with special deductions and credits, which can lower some companies’ tax bills but provide incentives to make investments that do not always make good business sense. Executives are often forced to make decisions based on tax implications rather than what’s best for their businesses, their stockholders and their workers.
Why it Matters to Retailers
Retail benefits from few of the tax breaks that lower tax bills for other industries, and pays the highest effective corporate tax rate of any sector of the U.S. economy – at or close to the maximum 35 percent. The retail industry would see significantly lower tax bills under proposals to “broaden the base” by eliminating most deductions and credits and to use the tax revenue that would be recovered to lower rates for all businesses. Corporate tax reform would benefit retailers by:
- Eliminating special tax breaks and allowing companies to make decisions based on business strategies rather than tax implications.
- Passing along the tax reduction to customers, thereby increasing sales, creating jobs, and increasing investment and job creation throughout the retail supply chain.
- Encouraging job-creating projects such as store improvements and opening new stores or distribution centers
NRF Advocates for Corporate Tax Reform
NRF has led the retail industry’s push for corporate tax reform and is an original steering committee member of the RATE Coalition, which represents a broad range of industries dedicated to the issue. In the course of dozens of meetings with lawmakers, policy experts and opinion leaders, and through reports and testimony, NRF has emphasized that reform of the existing tax system—not bumper-sticker proposals to abolish the IRS or scrap the tax code—is the proper path to economic prosperity. Tax reform principles adopted by the NRF Board of Directors set out priorities that would boost the economy and encourage job growth.
Time for Retailers to Get Involved
Having the world’s highest corporate tax rate isn’t something to cheer about. And it isn’t helping retailers who are working hard to restore our nation’s economy. It’s time for retailers to contact Congress and tell lawmakers the current tax system is hindering our industry’s ability to grow and create jobs. It’s time to tell Congress to act.
The National Retail Federation Board of Directors unanimously adopted a resolution outlining the retail industry’s position on comprehensive tax reform. The “Principles for Tax Reform” (PDF) includes the retail industry’s call for the elimination of special tax credits, deductions and incentives that favor one industry or business model over another in order to lower rates for all business types. NRF believes that broadening the base and reducing rates would boost the economy and job creation.