Retail industry is positive about Trump’s tax reforms
The US retail industry welcomed President Trump’s proposal of lowering corporate taxes. Matthew Shay, president and CEO of the National Retail Federation (or NRF), said, “We look forward to hearing more details but this is a very positive step forward to achieving the kind of comprehensive tax reform that is needed to keep our nation’s economy competitive in the global environment.”
Bill Simon, former Walmart (WMT) CEO, also appreciated the proposed plan. “By lowering the corporate tax rate and taxing from a territorial perspective, rather than a worldwide perspective, it would allow companies to make the best decisions based on the investment opportunity and not the tax code, and I think that’s important.”
How the retail industry benefits
The effective tax rate for S&P 500 (SPX) stocks is ~27.6%. As can be seen from the chart above, telecoms and industrials pay the highest taxes in the US. Retailers, which include consumer staples and consumer discretionary companies, also pay above the average rate.
According to NRF, retailers are among the highest effective corporate taxpayers in the US and pay close to 35% taxes. “As an industry that pays at or close to the full 35 percent federal corporate tax rate, our focus is on eliminating tax breaks that benefit only a few industries and using the money saved to lower rates for all businesses,” said Shay.
While discussing the positive impact of lowering taxes on retail, Shay added, “Retailers are affected by both the business and individual sides of tax reform.”
Shay noted, “The relief provided to corporations and small business ‘pass-throughs’ in this plan would help ease retailers’ tax burden” while “the middle-class relief provided here means consumers would have more money in their pockets.”