Proposed GOP tax plan could cost retailers $13 billion per year

[usiris]

http://www.wsj.com/articles/retailer...lan-1483698602

The TL : DR is that the GOP will cut corporate tax to 20% but "impose taxes on imported goods by making imports a nondeductible expense".

The tax bills of six large retail companies combined would jump by about $15 billion, to about $28 billion under the Republican plan, according to analysis.

Some economists and advocates of the plan say currency-rate adjustments will offset the tax changes and mute retailers’ objections. They see the U.S. dollar strengthening, making imports cheaper.

Tax experts estimate a border-adjusted tax could raise as much as $1 trillion in revenue; without it, the Republican plan wouldn’t add up.

Mr. Ciccarelli estimates that a border-adjusted tax would increase Wal-Mart’s annual tax bill to $16 billion from $6.6 billion. The tax increase could lower its annual net income to $5.5 billion from Mr. Ciccarelli’s estimate of $14.2 billion now, he says. The analysis assumes that Wal-Mart imports directly 20% of its goods, while another 15% are foreign made and sold to Wal-Mart by domestic suppliers.

Costco’s tax bill could rise to $3.2 billion from $1.2 billion; earnings could fall to $720 million from an estimated $2.4 billion, assuming Costco imports 15% of its goods directly with another 10% being foreign-made from U.S. suppliers.

Best Buy’s tax bill could climb to $3.8 billion under the proposal from $600 million now. That would wipe out the company’s earnings this year of an estimated $1 billion, and turn it into a loss of $2.1 billion.

At the same time, the Republican plan would cut corporate tax rates to 20% from a top federal rate of 35%. The ability to immediately write off capital expenditures under the Republican proposal would also be positive for some retailers.

Those changes would help Home Depot Inc. offset the negative impact of the border-adjusted tax, analysts said. Although its tax bill would rise slightly, to $4.8 billion under the plan, its annual net income would rise to $8.5 billion from $7.8 billion after deducting capital expenditures immediately, according to Mr. Ciccarelli.

This is an obvious aim to get companies to use U.S products, with little insight into how industry works:

(on Fords Mexico plant)

Now this is the scary part. I doubt that Trump nor many Americans understand the full implications of what he has said. He has stated repeatedly that he is going to impose a border tax on Mexican and Chinese made goods to force American companies to bring jobs back to the US, like GM and Ford. But the supply chains for this companies are huge, and they don't make a car from start to finish. No, they ship parts into these factories and have them put together at the factory. For example, the door frame on the Camaros are build in Kentucky and shipped to Lansing to be installed. I've seen trains filled with the front end of cars being moved, and I don't mean just bumpers. Why is the a problem? Because they have many small parts that are built in Mexico, like the gas tanks. These gas tanks are used in ford, GM, and Chrysler cars and built in Mexico. They aren't actually built there because it is cheaper, but because it is more efficient to build it there. There are a lot of automotive factories (that need gas tanks) in the sun belt, which is close to Mexico, there are also factories in Mexico that need these gas tanks. It's in a central location is what I'm getting at. And these companies have no say over where their gas tanks are made because its made by a separate, much smaller company. Trump is going to disrupt this, forcing american companies to either build new factories in the us, or these small companies like that gas tank supplier to go out of business because it can't afford to move those factories to the US, putting Americans out of work.

This is bad. While GM and Ford, are trying to find a new supplier for their tanks, building their own factories to supply tanks, or waiting for those other companies to build new factories, they need to slow or stop production for weeks on end. For example, a warehouse in Kentucky caught fire and destroy car parts, and as a result, GM shut down production for about a week and slowed production for another couple of weeks in Lansing. The part that caught on fire? Headlamps. The factory was fine, so the damage wasn't that bad, they just had to produce more headlamps, but imagine if they had to rebuild that factory. That's what Trump would cause.

And if that Tank supplier can't afford to build a new factory stateside, well he's going out of business, taking more jobs with them. You think that the tank supplier is only going to get rid of assembly line workers? Yea ok. We are talking about truckers, accountants, engineers, hell carrier companies could even go out of business. There is a multiplier on all business that illustrate how many jobs a company indirectly creates.

(source)

[Machismo]

This is more of that "small government" that the GOP and Donald Trump have been talking about. The GOP, the new party against free markets and capitalism.

[Bullettime]

This story broke weeks ago and it's sad it didn't get the attention it deserved. It's also interesting that the Koch Brothers, despite being the normally evil masterminds behind the scene, are vehemently against it because they realize the impact it will have on the every day consumer and how people actually need to have blood if you want to harvest.

[Lenonis]

The GOP has yet to put together a plan that doesn't either make things cost more or balloon the deficit. They still cling to a magical hope that they can do both.

Most of these plans have unrealistic expectations built into them to boot -- such as assuming a 10% GDP growth or a 20% growth in jobs.

[Teebone]

And these are the same politicians that used to call dems "Tax and Spenders" because... you know... that's how government works. "We're gonna create jobs!" should come with the tagline of "By quintupling the unemployment rate and punishing the lowest level workers".

These policies are going to destroy way way way more jobs than ever create. This is an absolute abomination of policy. *I* work in retail. *MY* job is now at risk. And unlike them, I don't have a taxpayer lifetime safety net. Right now I'm going through medical issues I'd never have been able to get treated without insurance and would NOT have survived from otherwise. What does Uncle Sam have against me?

[iperson]

It's amazing to me that people on the left spend so much time worrying about keeping jobs in countries with fewer workers rights and less environment protections than we have in the US. Gotta keep those iPad prices down regardless the human/environmental costs. How progressive...

[Edge-]

But...trickle down economics...

[Bullettime]

It is not really about that. It is who is harmed by this. It is not just iPads that will go up in price, but home goods, and food that the country uses as a whole, which means that the poor will actually be hurt more than me paying $100 more of an iPhone.

ding ding ding. Retailers like Wal-Mart do a huge amount of product importing, especially with electronics, clothing, and home items. Wal-Mart isn't going to accept a hit to their profits so they'll just jack the prices of goods up to compensate. It's ultimately those on the bottom who get affected.

Trickle down economics is one of the biggest bullshit concepts that people have ever been led to believe.

[Woadnson]

But...trickle down economics...

No longer apply, Trump's replacing it without Shower down economics.

[Jotaux]

I remember the days when free trade was considered a right wing policy.

- - - Updated - - -

But...trickle down economics...

I would love for a government to implement trickle up economics.

[Jotaux]

Maybe because some of us don't give a fuck what kind of conditions people in China or Indonesia live in. No foreign economic power made the West have its standard of living. For a group of people that cry foul at the notion of world police, you sure want world policing a lot.

So your argument is that you don't care about people? And then you equate economic pressure with invading a country?

[bloodkin]

No longer apply, Trump's replacing it without Shower down economics.

are these showers golden?

OT: this will also hurt a lot of manufacturing companies, as a lot of components and tools aren't made in the US.

[starlord]

haha, raising the minimum wage to $15 a year is fine by you guys, but this is somehow wrong. Let's pretend that not a single employee would be let go or have their hours cut under a $15 minimum wage. How much would increasing the minimum wage cost retailers since that is almost double the federal minimum wage? Do you even know how much these employers spend on payroll each year? But this $13 Billion is a bridge too far.

"If the minimum wage were increased to $15 an hour, prices at fast food restaurants would rise by an estimated 4.3 percent, according to a new study. That would mean a McDonald's Big Mac, which currently goes for $3.99, would cost about 17 cents more, or $4.16.Aug 3, 2015"
https://thinkprogress.org/this-is-ho...273#.6u5g8ljnf

"Wal-Mart (WMT, -0.82%) would have to spend an additional $4.95 billion if it were to raise the minimum wage for its hourly employees in the United States to $15 per hour from the current $10 per hour, according to an estimate by the UC Berkeley Center for Labor Research.
In the year ended Jan 31, 2016, the retailer generated $482.13 billion in revenue and posted net income of $14.69 billion."
http://fortune.com/2016/06/11/walmar...um-wage-study/

yea we do know how much it would cost, thanks. payroll is a much smaller portion of their costs than their actual goods.
not to mention a payraise has the benefit of enabling more consumer buying, unlike a tax raise...

[Woadnson]

are these showers golden?

In deference to John Oliver, Reagan's were the golden years, Trump's will be remembered as a shower of (bull)shit.

[abracmike]

are these showers golden?

OT: this will also hurt a lot of manufacturing companies, as a lot of components and tools aren't made in the US.

They used to be. Lately it's become a brown hailstorm though.

[Tinykong]

People do realize that we're going to be paying this tax, right?

If the cost to produce a $10 widget increases by $1, the big corporations aren't going to accept a $1 loss, that widget will now costs $11.

[Wildtree]

People do realize that we're going to be paying this tax, right?

If the cost to produce a $10 widget increases by $1, the big corporations aren't going to accept a $1 loss, that widget will now costs $11.

You're partially correct.

100% if the consumers price tolerance threshold isn't reached.
But once reached, or exceeded, then the correctness nears 0%.

At some point people don't buy your product anymore, and resort to your competitors.

Unless, the market is in the stranglehold of oligarchs, then they all raise the price, and you have no other choice.

[Tinykong]

You're partially correct.

100% if the consumers price tolerance threshold isn't reached.
But once reached, or exceeded, then the correctness nears 0%.

At some point people don't buy your product anymore, and resort to your competitors.

Unless, the market is in the stranglehold of oligarchs, then they all raise the price, and you have no other choice.

I'm pretty sure the last sentence is what the reality is. If Walmart raises prices, so will everyone else. The increases per individual item will be relatively small and hard to notice, but overall, we'll probably pay for most of it. If those sandals from Mexico on WalMart's shelves cost $11.49 instead of $9.99, most people wouldn't even give it a second thought. That's 15% right there.

[Wildtree]

I'm pretty sure the last sentence is what the reality is. If Walmart raises prices, so will everyone else. The increases per individual item will be relatively small and hard to notice, but overall, we'll probably pay for most of it. If those sandals from Mexico on WalMart's shelves cost $11.49 instead of $9.99, most people wouldn't even give it a second thought. That's 15% right there.

Yeah, I cannot agree more with you on that.