”This issue is too big to be pushed through Congress without full and deliberate debate of all its ramifications,” said Rachelle Bernstein, NRF’s president and tax counsel. “One of the clearest examples is the proposal to take away the ability to deduct the cost of imports as a business expense. This proposal amounts to a huge new tax on retail merchandise, gasoline for cars and raw materials needed by manufacturers.”

If the provision were to become law, the price of many consumer products could go up by a third, Bernstein said. “This proposal risks sending consumer spending into a tailspin and sending a huge number of jobs with it.”

Under current law, businesses can deduct the cost of imported merchandise or raw materials as a business expense the same way domestic products are deducted. Under the Growth and Investment Tax Plan, the deduction for imported items would be eliminated, effectively subjecting those items to the plan’s 30 percent corporate tax rate and driving up tax costs for importers, said the NRF.

The trade association calculates that the change would result in $194.4 billion in new taxes that retailers would be forced to pass on to consumers.

Because relatively few consumer goods are manufactured at competitive prices in the United States, retailers couldn’t easily shift to domestic products to avoid the tax, said the NRF.

The National Retail Federation comprises all retail formats and distribution channels, and represents more than 100 state, national and international retail associations. [February 2006 PET AGE]