Retail CEOs get Mnuchin into closed door meeting to lobby against import tax

Key Points
  • AutoZone, J.C. Penney and others are visiting Washington to lobby against the tax.
  • Treasury Secretary Steven Mnuchin will meet with industry leaders.
  • The border adjustment tax would bring an effective levy on imports.
Employees assist customers at the checkout counter of a J.C. Penney store.
Michael Nagle | Bloomberg | Getty Images

Chief executives from some of the nation's largest retailers are slated to meet with Treasury Secretary Steven Mnuchin on Tuesday for the first time, part of their ongoing push against the controversial border adjustment tax.

About 10 executives will join the closed-door meeting with Mnuchin, including the leaders of familiar names such as AutoZone, J.C. Penney, PetSmart and Chico's. (See the full list below.) Secretary Mnuchin is attending the Retail Industry Leaders Association's board meeting.

The industry has been leading the fight against the measure, which taxes imports into the United States. Chain retailers argue that it would increase the cost of foreign products and devastate their profit margins. They say that would force them to raise prices, costing consumers $1,700 more each year.

"There is no industry that wants tax reform more than retail," said Brian Dodge, a spokesman for the Retail Industry Leaders Association. "We are eager to work with Secretary Mnuchin and the entire Trump Administration to pass pro-growth tax reform this year so that American families can keep more of the money they earn and business can invest and grow."

Under the border adjustment tax, companies would be allowed to deduct the cost of American-made goods but not foreign ones — creating an effective tax on imports. The measure is a key component of the Republican blueprint for tax reform and has been championed by House Speaker Paul Ryan, R-Wis., and Ways and Means Chairman Kevin Brady, R-Texas. Analysts estimate it would raise about $1 trillion in revenue, which would in turn help finance a reduction in the headline corporate rate.

Manufacturers such as Boeing and Dow Chemical have fought to keep the measure alive despite heavy opposition in the Senate — even from Republicans.

In a statement, the American Made Coalition said: "Opponents have spent millions trying to stop tax reform in its tracks with the goal of preserving an outdated, broken tax system that favors foreign imports over American products and jobs."

The group has cited a survey from the Harvard Center for American Political Studies and The Harris Poll that found that 62 percent of voters support the border adjustment tax.

'We don't think it works in its current form'

The White House made no mention of border adjustment in the one-page summary of its tax reform principles released last month. However, Mnuchin has said that the proposal needs to be revised.

"There's many aspects of it we like. There's certain things we're concerned about," Mnuchin said during a conference last month. "What we discussed with [Ryan and Brady] is we don't think it works in its current form, and we'll continue to have discussions with them about revisions that they will consider."

At the G7 meeting of economic officials in Italy over the weekend, foreign finance ministers indicated that they were growing more comfortable with the United States' position. Several countries had been alarmed by the prospect of a border adjustment tax, but Italian Finance Minister Pier Carlo Padoan said those fears had subsided.

"I'm not worried about U.S. tax policy," he said. "I understand that there's a very ambitious tax reform program in the United States, and we're watching very closely on what's good for the United States and what can be learned by other countries on tax reform."

Retailers' push at Treasury comes just days before the Ways and Means committee is slated to hold its first hearing on tax reform on Thursday. The focus is on the ways that tax reform can boost hiring and economic growth.

"Opportunities like this only come around once in a generation," Ryan's office said in a statement.

Industry executives at Tuesday's meeting:

— CNBC's Lori Ann LaRocco contributed to this report.