As federal tax reform continues to be one of the hot buttons in Washington, D.C., a GOP Congressional task force has been appointed by House Speaker Paul Ryan to develop and submit its policy recommendations on this issue later this month.
Early feedback and intelligence suggest that the task force’s blueprint is NOT expected to be a detailed tax document. That means specific tax proposals are unlikely that would include repeal of the LIFO (last in, first out) accounting method, according to Jade West, Senior Vice President – Government Relations for the National Association of Wholesalers-Distributors.
That’s good news for equipment dealers and companies in other inventory-intensive industries which use LIFO accounting and understand the detrimental impact its repeal would have.
The Tax Foundation has released a new report analyzing the economic impact of repealing LIFO. It confirms that action would hurt businesses, destroy jobs and lead to less tax revenue for government.
Repeal was first proposed by GOP senators a decade ago to pay for a short-term gas tax rebate during a period of high oil prices. Since then, LIFO repeal has become a popular revenue-raising proposal and has been included in many Obama administration budgets.
Despite initial expectations about the task force report, industry members are encouraged to stay vigilant. “Please keep watching and listening, and let us know what else you learn,” says West. “We do need to be on top of this and prepared to respond if, in fact, repeal is included in the task force report.”
For those who haven’t seen it, the Tax Foundation has released a lengthy Options for Tax Reform document. They do include LIFO repeal among the tax reform options, but they report on it with the data they released in their LIFO study earlier this year, observing that while repeal would likely raise revenue, that revenue would be temporary and that repeal would in fact cause job losses and a reduction in long-run GDP. The LIFO report appears on page 78 of the paper, which can be accessed at http://taxfoundation.org/article/options-reforming-americas-tax-code.