Former Walmart (WMT) CEO Bill Simon and Target (TGT) CEO Brian Cornell took part in a hearing before the House Ways and Means Committee Tuesday, warning the GOP’s proposed border adjustment tax could take a bite out of middle- and lower-income Americans’ finances.
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Cornell, who advocated against the proposal, voiced concern over the need for retailers like Target to raise prices in response to the proposed 20 percent tax on imports.
“I worry about the impact on those families who for basic essential items, for clothing, for back to school essentials … could be paying prices that could be 20 percent higher,” Cornell said. “Every time we run the models, we come to the same conclusion, Americans will pay more for essential items.”
The uncertainties related to how a border-adjusted tax would impact the U.S. dollar, the retail industry and U.S. imports resonated particularly strongly with Cornell who added: “I can’t ask American families to sit back and say ‘if these things happen, you’ll be okay.’”
Simon, who led Walmart for four years, took a more moderate position, believing the proposal could bring the intended economic benefits so long as it is implemented the “right” way.
”If properly implemented, it’s in the best interest of the country for this to be considered … Most manufacturing capacity that exists in the world … no longer exists in the U.S.”
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While Simon sees tax reform, including the border adjustment tax, as a pathway toward reviving the U.S. manufacturing sector, he acknowledged there will be some transitional challenges for the retail industry. If those difficulties aren’t taken into account by Congress throughout the implementation process, the results could be damaging, Simon warned.
“[A border adjustment tax] improperly implemented … will be very, very hurtful for the industry and the consumer,” he said.
Despite a difference of opinion among witnesses and lawmakers present Tuesday, the prevailing opinion was comprehensive tax reform is necessary. Both Democrats and Republicans agreed the corporate tax rate needs to be lowered in order to make U.S. businesses more competitive on the global stage and the tax code should be simplified; two pieces included in the plan put forth by President Donald Trump and his team.
The Trump administration has not yet supported the border adjustment tax. Treasury Secretary Steven Mnuchin said during a hearing before the Senate Banking Committee last week that the administration does not support the proposal in its current form.