Retail CEOs Take Contentious Border-Tax Fight to White House

  • Best Buy, Target and Walgreens CEOs slated to meet with Trump
  • Proposed border-adjustment tax has divided corporate America

The Winners and Losers of a Border-Adjustment Tax

Since Donald Trump was elected in November, retailers and their lobbyists have been plotting how to fight a Republican-backed tax reform plan. Now they’ll get to make the argument directly to the president.

Eight industry executives are scheduled to meet with Trump on Wednesday morning to discuss the tax proposal, a controversial measure that has divided corporate America. The group, which is said to include leaders from Best Buy Co., Gap Inc. and Target Corp., will focus on the tax’s potential impact on consumer prices.

The issue has pitted corporate giants against one another, with retailers and other net importers on one side and exporters on the other. And there are billions of dollars at stake: The proposed overhaul of the corporate tax code, supported by House Speaker Paul Ryan, would reward companies that sell products outside the U.S. while punishing ones that rely on low-cost overseas suppliers.

Retailers, already battered by sluggish mall traffic and a shift to e-commerce, have additional incentive to fight the tax, said Allen Adamson, who runs the branding firm Brand Simple Consulting.

“They’re already struggling to remain competitive, and this won’t help them,” he said. “They’re under huge cost pressure from online, and brick-and-mortar retailers in general need to be sure they don’t cede any more ground.”

AutoZone, Walgreens

The gathering is also expected to include the chief executive officers of AutoZone Inc., J.C. Penney Co., Jo-Ann Stores, Tractor Supply Co. and Walgreens Boots Alliance Inc., according to a person familiar with the event, who asked not to be identified because the details haven’t been released publicly.

The retailers will meet with members of Congress as well as the president, according to David French, head of government relations for the National Retail Federation.

“Retailers are on the front lines of the consumer-driven U.S. economy,” French said in a statement. “It is extremely important that they engage with elected officials on policies of this magnitude and that their voices be heard and acknowledged.”

Importers’ Burden

The Ryan-backed proposal would put a levy on U.S. businesses’ domestic sales and imported goods, while exempting exports from their taxable income. The tax would be assessed at a 20 percent rate and would replace the current 35 percent corporate income tax.

The retail summit comes a week after Trump assailed Nordstrom Inc. for dropping daughter Ivanka’s brand. The department-store chain, which blamed poor sales for the move, treated the first daughter “so unfairly,” the president said in a tweet.

Trump had an earlier feud with Macy’s Inc., which previously sold his brand of menswear. That company split with him in 2015 after he criticized Mexican immigrants at the outset of his presidential campaign. Trump called Macy’s a “very disloyal company” and urged a boycott.

Neither department-store chain is currently included as part of Wednesday’s gathering, according to a person familiar with the situation.

The border-adjusted tax is meant to help promote domestic manufacturing. But consumers seem loath to pay more for U.S.-made goods, Adamson said. That’s put retailers in a quandary, he said.

“The majority of people say they want to buy American,” Adamson said. “But when they vote with their wallets, they often just go with the cheapest option.”

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