Tradelines News

Get the latest news and updates on cross-border customs and international trade.

How a Controversial GOP Plan Could Boost the Taxes on a Sweater from $1.75 to $17

(Courtney Reagan – CNBC)

President-elect Donald Trump’s tariff rhetoric has gotten a lot of attention, but it’s actually the Republican House Ways and Means Committee’s “A Better Way” tax reform proposal that’s scaring the pants off clothing and shoe retailers.

The plan was proposed in June, but wasn’t a focal point until it became more of a possibility under a Republican-controlled Congress and White House.

Now, retailers are nervous. Very nervous.

As expected with a corporate tax reform policy, it’s complex, but it boils down to three pieces.

First, instituting a flat 20 percent corporate tax, which is a welcome change from a typical 35 percent corporate tax rate.

Second, it allows for the immediate expense of business investments, instead of over time as it is now. That’s part is likely OK with many, too.

But, the third piece is the real zinger for retail. It’s a border-adjustment tax for goods that are imported. About 95 percent of clothing and shoes sold in the U.S. are manufactured overseas, which means imports make up a vast majority of many U.S. retailers’ merchandise. The tax is aimed at encouraging more manufacturing in the U.S. as well as raising government funds. Click here to read more.