New tax could ‘bankrupt US footwear companies’
24/05/2017
Matt Priest has warned the House Tax Reform Blueprint could impose a new $1.2 trillion border-adjusted tax (BAT) that could fall disproportionately on American footwear consumers and companies.
“A one-size-fits-all policy for taxing every import that crosses our borders simply does not add up for workers in our industry and would bankrupt many US footwear companies. This policy proposal risks halting the recent progress made in domestic footwear manufacturing, and the academic theory behind the BAT is anything but certain in the real world.
“Our industry is hit particularly hard by this proposed policy, because footwear companies utilize global supply chains to deliver more than 2.3 billion pairs of shoes to US consumers each year. These global supply chains take decades to build and require substantial capital investment and a large workforce committed to learning the intricate skills of shoemaking, which can involve more than 100 touches to make a basic pair of leather dress shoes.”
He added that companies are unable to simply move these complex supply chains to the US to prevent being penalized with a substantial new tax burden.
While the average tariff rate on consumer goods crossing US borders is 1.5%, footwear tariffs average 11% and can be as high as 67.5%.
“Footwear is an extremely price sensitive industry,” added Mr Priest. “If companies are forced to raise prices by 20 to 25% to adjust to the BAT, they will sell considerably fewer pairs of shoes. Not only would the BAT force customers to buy shoes at higher price points with no additional value added, the decrease in shoe sales would require large reductions in trucking, warehousing, retail, and support staff jobs across the U.S. and threaten the viability of many footwear companies operating at an already challenging time for retail.”
American companies have been divided on the issue, which is being debated at the White House. Target CEO Brian Cornell testified on behalf of companies opposing the tax, while Bill Simon, a former executive for Wal-Mart, said it would boost domestic manufacturing.
Image: Although New Balance operates US factories, the majority of its stock is imported
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