Retail CEOs Meet With Trump Over Border Tax Concerns -- Update
February 15 2017 - 6:58PM
Dow Jones News
By Khadeeja Safdar and Louise Radnofsky
Chief executives from several major U.S. retailers, including
Target Corp., Best Buy Co. and Gap Inc., met with President Donald
Trump on Wednesday to lobby against a proposed tax plan that would
hurt their profits.
The executives left the White House meeting, which lasted less
than an hour, saying it was productive but they gave few details
about what was discussed. Mr. Trump, meanwhile, tweeted a photo
with the group, calling it a "great listening session."
Mr. Trump has been meeting nearly every week with groups of CEOs
and used the occasions, and ensuing media coverage, to tout his
efforts to create U.S. jobs and cut taxes and regulation. He has
met with pharmaceutical executives and manufacturing CEOs.
But the retailers at the meeting, which also included J.C.
Penney Co. and Walgreens Boots Alliance Inc., stand to lose more
than do other industries if Mr. Trump imposes new tariffs on trade
or taxes on imports. Most rely heavily on overseas factories for
the goods they sell.
Flanked by his son-in-law, Jared Kushner, and adviser Gary Cohn,
Mr. Trump praised the executives, calling them "some of the great
CEOs of our country, and the biggest in the retail industry."
Mr. Trump spoke about his administration's hope for regulatory
changes and overhauling the tax code. "We're cutting regulations
big league," he said. He called the tax code "too complicated" and
promised to simplify it.
"We're going to lower the rates very, very substantially for
virtually everybody in every category, including personal and
business," he said.
The border-adjusted tax proposal, which would tax imports and
exempt exports, is part of a House Republican plan aimed at
encouraging companies to locate jobs and production in the U.S. The
plan would also cut the corporate tax rate, permit multinational
firms to repatriate foreign profits and allow companies to write
off capital expenses immediately.
The proposal has divided business leaders, with retailers among
the industries that have opposed it and big exporters supporting
it. Mr. Trump has been ambivalent about the border-adjustment plan,
and the White House now says it is one option.
Several retail CEOs have raised concerns about the measure,
warning it would force them to raise prices because they rely so
heavily on imported goods. They visited with congressional leaders
later Wednesday.
After that meeting, Rep. Kevin Brady, a Republican who also
heads the House Ways and Means Committee, said the
border-adjustment proposal is a "critical component" of the broader
tax plan. "There is no real tax reform that keeps in place tax
breaks for foreign products over American products," he said in a
CNBC interview. "No one has yet convinced anyone that we should
defend the current code that forces jobs overseas."
Bill Rhodes, CEO of AutoZone Inc., spoke briefly after the
meeting with Mr. Trump but didn't take questions. The Retail
Industry Leaders Association, a trade group that organized the
meeting, issued a statement from Mr. Rhodes saying that the
companies "stressed the importance of taking a thoughtful approach
to tax reform for both individuals and corporations."
According to Target, the border-adjustment proposal came up
during the meeting, and the retailer said the proposal would raise
prices for U.S. consumers. "If enacted, the House proposal would
have profound implications for our guests and business, and at
Target, we believe that anything that raises prices for families is
not a good idea for America, " it said.
The retail industry is already struggling with dwindling foot
traffic and shrinking profit margins as more U.S. consumers do
their shopping online. Earlier this year, several retailers,
including Sears Holdings Corp. and Limited Stores LLC, announced
drastic store closures because of weak sales.
A plan that increases taxes on imports would hurt retailers that
produce many of their goods overseas but sell them largely in the
U.S., while those with stronger international sales and pricing
power, such as Nike Inc., wouldn't be as adversely affected,
according to Randal Konik, an analyst at Jefferies.
Write to Khadeeja Safdar at khadeeja.safdar@wsj.com and Louise
Radnofsky at louise.radnofsky@wsj.com
(END) Dow Jones Newswires
February 15, 2017 18:43 ET (23:43 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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