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Manufacturing News
November 14, 2005 Vol. 12, No. 20
310 Words Page 10

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Tax Reform Panel's Proposal To Encourage U.S. Production Ruffles Feathers Of Retail Industry

The President's Advisory Panel on Federal Tax Reform's final report, released on Nov. 1, landed with a thud. But contained deep within its pages was a proposal to change the way imports and exports are taxed. The idea is to remove incentives for U.S. multinational companies to move production offshore and to encourage foreign manufacturers to locate production in the United States.

The proposal, outlined starting on page 167 of the plan under the "Growth and Investment Tax Plan" portion of the report, has thrown the U.S. retail community into a tizzy.

"This proposal amounts to a huge new tax increase for American consumers that would dramatically drive the price of everyday necessities," declared Tracy Mullin, president of the National Retail Federation (NRF). "The Advisory Panel seems to have forgotten that the majority of consumer products sold in U.S. stores are made overseas. We're talking about everything from underwear to gas for our cars and virtually all of the toys that go under the tree during the holidays."

NRF claims the proposed "import tax" would drive up prices of consumer imports by one-third. Consumer spending would go into a tailspin "and take a lot of jobs along with it," says Mullin.

The retail federation says $648 billion in general merchandise was imported into the country last year. A 32 percent corporate rate proposed under the plan would result in $207 billion in new taxes that importers would be forced to pay. U.S.-based manufacturers importing raw materials, minerals and components would also be impacted.

"Relatively few consumer goods are manufactured at competitive prices or in commercial qualities in the United States, so retailers can't easily shift to domestic products to avoid the tax," says the Retail Federation. The proposal to eliminate the corporate income tax deduction for imports "cannot be allowed to become law," said Mullin. The tax panel's report can be downloaded at http://www.tax reformpanel.gov/final-report/.