Retail groups give mixed reviews to White House's corporate tax plan

Retail industry groups gave mixed reviews on Wednesday to President Obama's corporate tax plan suggesting it favors some industries over others. 

The National Retail Federation (NRF) and the Retail Industry Leaders Association (RILA) support an overhaul of the corporate tax code but agree the Obama administration needs to ensure that any reform is fair to all businesses and aims to create jobs and grow the economy. 

The White House proposal calls for lowering the top corporate tax rate to 28 percent to 35 percent corporate rate by eliminating certain preferences and incentives. The plan proposes to drop the effective tax rate paid by manufacturers to about 25 percent.

RILA criticized the White House's plan, arguing that it favors some industries and doesn't provide an avenue for the greatest amount of job creation. 

"Government shouldn’t use the tax code to pick winners and losers," said Katherine Lugar, executive vice president for public affairs of RILA, in a statement.

"Unfortunately, the president’s proposal preserves special preferences that give some industries advantages at the expense of others,” she said.  

Another fault of the plan is that it calls for the taxation of international income, "a harmful policy that is increasingly unique to the United States," Lugar said. 

RILA supports a territorial tax system, which is part of a Republican proposal, that would tax the domestic earnings of U.S. businesses and prevent the double taxation of their foreign operations abroad, which RILA argues puts them at a competitive disadvantage to foreign competitors.

"The president’s proposal is a significant step forward, and we hope the administration will work closely with those in Congress who have proposed going even further,” said Matthew Shay, NRF president and chief executive. 

“Tax reform is a once-in-a-generation opportunity and we need to get it right," Shay said.

"Reform needs to address small businesses as well as corporations, and needs to be fair to all industries rather than favoring one over another.”



NRF has supported corporate tax reform that would eliminate most if not all credits and deductions rather than creating new ones, favoring a plan by House Ways and Means Committee Chairman Dave Camp (R-Mich.) that would lower the top rate to 25 percent for corporations and individuals. 

Camp also has proposed switching the United States to a territorial system for taxing corporate profits, essentially shielding much of the profits a company makes outside the United States from U.S. taxes. 

That proposal runs at odds with Obama’s plan for a minimum tax on foreign earnings, and providing incentives for bringing jobs back to U.S. shores.

Camp welcomed the White House plan but, as he did last week, chastised the administration for failing to propose a comprehensive reform of the tax code, individual and corporate. 

Some tax experts are cautioning lawmakers that it will be difficult to make changes to the corporate code on its own without placing a greater burden on individual taxpayers, meaning they tax code should be tackled as a whole. 

In addition, the chances of moving any type of overhaul in an election year seems unlikely, at best. 

Retailers argue that they are few benefits for their industry in the tax code and they pay some the highest effective rates of any U.S. sector, often at or close to the full 35 percent statutory rate. 

NRF points out that many retailers are small businesses that pay their taxes utilizing individual tax rates. 

Obama administration officials, including Treasury Secretary Timothy Geithner, have said they want the tax-reform framework to jump-start negotiations with Congress.

Geithner is expected to meet with congressional leaders next week on the issue — one where Republicans and Democrats could reach a consensus, if not this year, possibly by the end of 2013.