Lowering the corporate tax rate on retailers could create more than 327,000 jobs in the first year, save consumers $10.2 billion, and increase salaries and wages by more than $10 billion, according to a new study by PricewaterhouseCoopers, commissioned by a retail trade group.
The report, commissioned by the Retail Industry Leaders Association, contends that while retail is America’s second-largest private employer, the retail industry pays the fourth-highest domestic effective tax rate at 36.4 percent, more than 10 percentage points above the average for all other industries. The report from RILA and PwC argues that revenue-neutral corporate tax reform that reduces the retail industry’s financial statement federal income tax rate to the current average for all industries, could have a substantial and immediate effect on retail’s contribution to the economy. “Tax savings could be used to add new jobs, increase wages, lower prices, or increase capital investment, or some combination of these,” said the report.
According to the report, 17.8 million Americans are employed by the retail industry. In addition, 10 million more jobs within other sectors, such as finance, transportation and manufacturing, rely upon the retail industry. The report finds that a hypothetical tax reform plan that treats all industries equally and lowers the corporate tax rate to the current average of 26.6 percent would result in annual savings of more than $10 billion to the retail industry.
“With one in five American jobs reliant on retail, the industry is one of America’s most powerful economic engines. However, the retail industry’s treatment under the current tax code belies its prominent place in the economy and stifles job creation, investment, and consumer savings,” said RILA vice president for tax policy Kirt Johnson in a statement.
In addition to the billions of dollars retailers pay in federal, state and local taxes each year, retailers collect and remit billions more in sales taxes to state and local governments, the report argues.
However, retailers face high taxes not only in the U.S. Over the 2007-2011 period, on a worldwide basis, companies in the retail trade industry faced a weighted-average financial statement effective tax rate of 35.3 percent, a current financial statement tax rate of 33.9 percent, and a cash tax rate of 32.4 percent, according to the report. Over the same period, on a domestic basis, companies in the retail trade industry faced a weighted average financial statement ETR of 36.4 percent and a current financial statement tax rate of 34.2 percent.
Over the 2007-2011 period, on a worldwide basis, companies in the retail trade industry had a weighted average financial statement effective tax rate 7.6 percentage points higher than for all industries, a current financial statement tax rate 8.9 percentage points higher, and a cash tax rate 9.1 percentage points higher. Over the same period, on a domestic basis, companies in the retail trade industry faced a weighted average financial statement effective tax rate 8.7 percentage points higher than for all industries and a current financial statement tax rate 10.3 percentage points higher.
“RILA supports comprehensive tax reform that broadens the base and substantially lowers the corporate tax rate, and treats all industries the same,” said Johnson. “Doing so will free retailers to invest, expand their businesses, and most importantly, create new jobs.”