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Focus on promoting growth amid discussions about tax reform

We are at a crucial stage of economic transition, with growth positive but slowing, and are therefore facing important policy decisions with significant implications for consumers, retailers and the wider economy.

Jack Kleinhenz, chief economist at the National Retail Federation, recently stressed that we are in a holding phase, similar to 2017 – waiting for inflation to stabilize and the Federal Reserve to adjust interest rates. This phase represents a delicate balance, and any misstep could have lasting consequences.

Monthly economic report

Each month, the NRF reviews the health of the U.S. economy, including consumer sentiment, employment, housing, retail sales and other leading economic indicators. Learn more.

Our current economic landscape is characterized by falling inflation and stable consumer spending. Despite a slowdown in GDP growth from 3.4% in the fourth quarter of 2023 to 1.4% in the first quarter of 2024, the economy continues to show signs of stability. Personal incomes and savings are rising and the labor market remains robust. These indicators suggest that the Federal Reserve has room to maneuver without rushing its interest rate decisions.

Yet amid this fragile recovery, proposals are on the table that could threaten our economic progress. The Biden administration and Democrats in Congress are considering significant tax increases, including a corporate tax hike. This move would be a serious misstep, especially as we strive to maintain economic growth and stability.

Raising the corporate tax rate would hurt the United States’ ability to compete on the world stage. Our corporate tax rate would exceed that of our international competitors, discouraging investment in American companies and potentially leading to job losses and reduced economic activity. A higher corporate tax rate would also hurt working families by lowering wages, raising prices, and reducing retirement savings.

Historical precedents illustrate the dangers of such tax increases. In contrast, the economic booms triggered by the Kennedy and Reagan tax cuts demonstrate the benefits of lower tax rates. These periods of lower taxes led to significant economic growth, job creation, and higher living standards. Conversely, tax increases during times of economic uncertainty risk slowing growth, reducing household income, and increasing the deficit.

At NRF, we advocate for policies that support robust economic growth and a healthy retail sector. Retail is a cornerstone of the U.S. economy, contributing $5.3 trillion to annual GDP and providing 55 million jobs. Policies that hinder growth, such as raising corporate taxes, pose a threat to retailers, consumers, and the overall economy.

The Congressional Budget Office predicts a decade of weak economic growth averaging just 1.8% per year, even if current tax and spending trends continue. We cannot afford to settle for subpar growth. Instead, we should adopt growth-enhancing policies that lower tax rates and encourage investment to increase productivity and economic output.

In this critical economic situation, let us focus on maintaining the progress made by maintaining a competitive corporate tax rate.

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