STORES Magazine - January 2010 - (Page 8)

CONSIDER THIS / PRESIDENT’S PAGE VAT Rears Its Head Again BY TRACY MULLIN The Voice of Retail Worldwide STORES is published by NRF Enterprises Inc., ith the federal deficit increasing at unsustainable levels due to ongoing wars in Iraq and Afghanistan, growing entitlement programs and a general inability to rein in government spending, lawmakers in Washington are once again looking for ways to raise revenue. And one of the top options — the long-dreaded Value Added Tax — could prove devastating for retailers. VATs are the darlings of ivory-tower economists, and proposals have come and gone over the years. They are usually shot down, however, when retailers and others actually trying to run businesses point out the impact any major new consumption tax would have on the consumer spending that makes up two-thirds of our nation’s gross domestic product. A VAT can be imposed in various ways, but it ultimately amounts to a national sales tax paid by consumers at the cash register, driving up prices and discouraging spending. But there are signs that the coming year’s VAT debate could have more legs than those of past years, with the potential for action fueled by the deficit and support coming from Democrats and Republicans alike. Senate Budget Committee chairman Kent Conrad (D-N.D.) wants a VAT considered by the bipartisan commission he and ranking member Judd Gregg (R-N.H.) plan to create for the purpose of addressing the deficit. Going beyond the usual proposal of a VAT as an alternative to the current income tax system, Conrad and House Speaker Nancy Pelosi (D-Calif.) say a combination of a VAT and the income tax system is needed to address the increasing deficit that will result from scheduled growth in entitlement programs. Top tax policy advisors to former presidents George W. Bush and George H.W. Bush agree, and former Clinton White House Chief of Staff John Podesta and former Federal Reserve chairmen Alan Greenspan and Paul Volcker have also been on the VAT bandwagon to varying degrees. To date, the Obama administration has rejected a VAT because of its regressive impact on lower-income families and Obama’s campaign pledge not to raise taxes on those earning less than $250,000 a year. But a number of economists have suggested ways to offset those concerns by providing other benefits to low-income taxpayers. There’s no question a VAT could bring in significant tax revenue: recent estimates project about $60 billion for every 1 percent imposed across the board on all goods and services. Policymakers have suggested a VAT of 15 to 25 percent would be needed to address the $1.4 trillion deficit and also provide substantial reductions in current income tax rates. The last time VAT was seriously debated in Washington, PricewaterhouseCoopers conducted an extensive study for NRF that found a consumption tax would cause economic disruption for years before any benefit could be seen. The study determined that GDP, employment and consumer spending would all take massive hits. In a normal economy, that would cripple many retailers; in today’s economy, it could be downright fatal. W a subsidiary of National Retail Federation Inc., 325 7th St. NW, Washington, D.C. 20004. (202) 783-7971 FAX (202) 737-2849 CHAIRMAN OF THE BOARD Myron E. (Mike) Ullman, III, Chairman and CEO, J.C. Penney Company, Inc. VICE CHAIRMEN Philip L. Francis, Chairman and CEO, PetSmart, Inc. Stephen I. Sadove, Chairman and CEO, Saks Incorporated PRESIDENT & CEO Tracy Mullin SENIOR VICE PRESIDENTS Denise Brassé, Industry Relations Mallory B. Duncan, General Counsel Michael G. Gatti, Communications David Hogan, Retail Operations and CIO Carleen C. Kohut, CFO Steven J. Pfister, Government Relations NRF Divisions Association for Retail Technology Standards EXECUTIVE DIRECTOR Richard E. Mader (202) 744-8217 National Council of Chain Restaurants PRESIDENT John R. (Jack) Whipple (202) 626-8187 FAX: (202) 626-8185 Retail Advertising & Marketing Association EXECUTIVE DIRECTOR Michael G. Gatti (202) 626-8117 FAX: (202) 737-2849 EXECUTIVE DIRECTOR Scott Silverman (202) 626-8132 FAX: (202) 626-8191 325 7th Street, NW Suite 1100 Washington, D.C. 20004 All articles published in this magazine represent solely the individual opinions of the writers, and not necessarily those of the National Retail Federation. 8 STORES / JANUARY 2010 WWW.STORES.ORG http://WWW.STORES.ORG

Table of Contents for the Digital Edition of STORES Magazine - January 2010

STORES Magazine - January 2010
Editor's Page
President’s Page
Retail People
CEO Profile
20 Ideas Worth Stealing
Digital Coupons
Customer Loyalty
Labor Scheduling
Data Management
Human Resources
Retail Fraud
Loeb Retail Letter
ARTS Update
NRF News
Point of View
Retail Industry Calendar
End Cap
Global Powers of Retailing

STORES Magazine - January 2010