ARLINGTON, VA – Today, the National Grocers Association (NGA), the trade association representing the independent supermarket industry, released the following statement on the House Ways and Means Committee’s hearing on tax reform:
“We applaud the House for taking an important first step towards a once-in-a-generation tax reform that can create a level playing field for American businesses and spur job growth in communities across the country,” said Peter J. Larkin, president and CEO of NGA. “Independent grocers are serious about achieving meaningful tax reform that will significantly lower effective rates for Main Street businesses.”
The independent supermarket industry is prepared to forgo certain tax provisions that have benefited the industry in exchange for a simplified tax code. Independent grocers believe the following principles should guide the House and Senate as they consider tax reform:
- Lowering the tax rate across the board. Many industries are able to take advantage of narrowly structured deductions and credits to craft an effective tax rate in the single digits. Independent grocers have limited access to many of these deductions and pay at, or near, the top marginal rate.
- Maintaining the interest expense deduction. While most independent supermarkets do not generate meaningful amounts of interest income, many carry interest expense on their books. Grocers rely on debt to finance everything from daily operations to large renovations. Altering any piece of the deduction would slow economic growth and could lead to fewer jobs being created.
- Creating parity between pass-through entities and C-Corporations. Congress should not dictate decisions about or favor one type of legal entity over another. Tax reform must include both pass-throughs (which represent 95 percent of the business filing in the U.S. in 2012) and C-Corporations, and should create parity between the two structures. Both deserve a lower effective federal tax rate.
- Rejecting a border adjustment tax (BAT). If a BAT is put in place, American consumers could face higher food prices for goods that in many cases are not produced in the U.S. (e.g., coffee, bananas). If the purpose of a BAT is to help create jobs, as proponents argue, then taxing products that cannot be made on American soil does not make sense.
- Preserving the use of last-in, first-out method of accounting (LIFO). The LIFO method of inventory accounting has been allowed since 1939 and is broadly used in the food wholesale and retail industry. LIFO helps protect against inventory price shocks that can result from inflation and is an important tool that aids the industry in long-term planning.
- Permanently repealing the estate tax. Well over half of the assets of a typical supermarket—the highest of any other industry sector—are not liquid, so the death of an owner creates a serious obstacle to the continuation of the business. Because the estate tax is assessed on the value of a business at the owner’s death, it often forces families to borrow funds to pay the tax. This tax could destroy family-held business, hurting communities by causing the loss of jobs.
To view NGA’s written statement for the record submitted to the House Ways and Means Committee, click HERE.