NRF Urges Congress to Focus on Jobs in Tax Reform

For Immediate Release
J. Craig Shearman (202) 626-8134
shearmanc@nrf.com
www.nrf.com/VAT

NRF Urges Congress to Focus on Jobs in Tax Reform

WASHINGTON, June 2, 2011 – A senior executive from Sears testifying on behalf of the National Retail Federation told Congress today that lawmakers should focus on jobs and the economy as they explore options for corporate tax reform.

“Sears Holdings and other members of NRF believe that the most important aspect of any tax reform measure is its impact on the economy and jobs,” Sears Holding Corporation Vice President for Tax James Misplon said. “It is vitally important that any tax reform measure do no harm to our economy.”

"We support tax reform that would broaden the income tax base and lower the income tax rates,” Misplon said. “The elimination of many special deductions and credits in exchange for lower rates will bring about a more economically efficient tax system that is simpler for taxpayers and will ease enforcement.”

Misplon testified before the House Ways and Means Committee this morning during a hearing on how corporate tax reform can encourage job creation. Sears Holdings Corporation – the parent of Sears, Roebuck and Co., Kmart and Lands’ End – is an NRF member and Misplon chairs the NRF Taxation Committee.

As a domestic industry with few of the tax breaks enjoyed by other industries, retail pays the highest effective federal tax rate of any sector of the economy and is likely to see a lower effective tax rate under tax reform. Under the highly competitive nature of the retail industry, NRF believes most of that reduction would be passed on to consumers through lower prices. That would enable retailers to increase sales volume, which would create the need for more employees in stores and distribution centers. In addition, retailers would purchase more inventory, increasing investment and jobs throughout the supply chain.

Misplon told the committee that return on investment is the key factor for most retailers in deciding whether to go forward with projects such as improvements to stores, building new distribution centers or improvements to internal systems. A lower corporate tax rate would make it easier to meet the ROI sought by companies, leading to higher employment both within and outside the retail industry.

Lower tax rates would also allow retailers to make decisions based primarily on business strategies rather than tax implications, he said.

Misplon urged the committee to reject proposals such as a Value Added Tax or other forms of consumption tax.

“One of the most harmful things that could be done to our economy at this time would be to place a direct federal tax on consumption,” he said.

A study conducted for NRF in 2010 by Ernst & Young and the economic research firm Tax Policy Advisers found creation of an add-on VAT to reduce the federal deficit would result in the loss of 850,000 jobs in the first year, reduce gross domestic product for three years, and bring a permanent drop in retail spending totaling $2.5 trillion over the first 10 years.

As the world's largest retail trade association and the voice of retail worldwide, the National Retail Federation's global membership includes retailers of all sizes, formats and channels of distribution as well as chain restaurants and industry partners from the United States and more than 45 countries abroad. In the United States, NRF represents the breadth and diversity of an industry with more than 1.6 million American companies that employ nearly 25 million workers and generated 2010 sales of $2.4 trillion. www.nrf.com

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