As the issue of tax reform moves to the Senate, where the Finance and Budget Committees have already approved a bill similar to that passed by the House of Representatives earlier this month, grocery industry groups renewed calls for comprehensive tax reform legislation to be enacted.
“Our industry, the largest sector of American manufacturing jobs, calls on the Senate to quickly pass tax reform legislation,” said Pamela G. Bailey, president and CEO of the Arlington, Va.-based Grocery Manufacturers Association. “Tax reform is necessary to improve the global competitiveness of U.S. manufacturers who make our food, beverage, personal care, and household products, and to increase the purchasing power of middle class consumers. Senate passage is essential to the adoption of the most significant tax reform effort in 30 years.”
Following Senate action, discussions to find a compromise bill will be held with the House, which passed its own tax reform bill on Nov. 16.
The National Grocers Association (NGA), the trade association representing the independent supermarket industry, and 152 state trade associations and food retailers requested that the Senate ensure that the bill it passes will achieve rate parity between C-corporations and pass-through entities, which account for almost half of NGA’s member companies.
The groups sent a letter to senators expressing support for the Tax Cuts and Jobs Act, but also pointing out that as the bill now stands, the proposed effective tax rate on qualifying pass-through businesses would be about 32 percent, or 12 percent higher than that of C-corporations.
“America’s pass-through independent supermarkets are a large and vital part of the economy, and the new lower business tax rate needs to reflect their importance by being broadly applied and effectively enforced,” the group wrote to senators. “We urge Congress to support reforms that create a more level playing field for Main Street supermarkets so they can grow their businesses and create local jobs.”
In September, House and Senate leaders unveiled a Unified Framework that pledged to treat pass-through businesses fairly in relation to their corporate competitors and called for a rate differential of five percentage points. The Senate bill overlooks this pledge and sunsets the pass-through deduction in seven years.
“Independent supermarkets are driving innovation in the marketplace,” the letter notes. “From implementing ecommerce strategies to developing new formats that enhance the customer experience, independent grocers are truly leading the way. We know tax reform can help these entrepreneurs to continue to invest in their communities, employees and communities. We look forward to working with you and your colleagues to grow this important sector of the economy.”