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Tax Increases Would Hurt Grocery Industry After Challenges Of Past Year

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Leslie G. Sarasin

By Leslie SarasinPresident and CEO, FMI – The Food Industry Association

During the past year, America’s grocers stepped up and made the necessary investments to safely keep stores open and shelves stocked. Now, after one of the most challenging years for the food retail industry, lawmakers propose to raise taxes, which would make our job – feeding America – more difficult.

At this precarious moment, policymakers should maintain the current tax rates and help the food retail industry adapt and recover from the pandemic so we can continue to serve our communities.  

In the early weeks of lockdowns and stay-at-home orders, the food supply chain was turned upside down. Suddenly, consumer demand for groceries spiked to a level not seen in nearly 50 years. The food-at-home CPI increased 2.7 percent in April 2020, which was the largest monthly jump since 1974.   

In response to the sudden changes, America’s grocers went to work for their communities and made the necessary investments to safely keep stores open and meet the increased demand for food and necessities.

To do so, grocers invested more than $24 billion on everything from personal protective equipment and increased sanitation to new technology to accommodate online ordering, curbside pickup and home delivery.  

After more than a year of unexpected investments, the latest news from Washington that the Biden administration is urging Congress to scale back portions of the 2017 tax law is particularly concerning for grocers who are just beginning to see an ease in pandemic-related expenses.

The administration is proposing a seven-percentage-point increase in the corporate tax rate to fund its infrastructure bill, just one in a series of hikes that will impact retailers’ bottom lines. 

The Tax Foundation, a leading tax policy think-tank, estimates this would “reduce long-run economic output by 0.8 percent, eliminate 159,000 jobs, and reduce wages by 0.7 percent.” 

For grocers, these added costs in the form of higher taxes will have an outsized impact on the industry’s ability to give back to our communities and continue to provide good jobs as we have throughout the pandemic. In fact, between 2019-20, food retailers added more than 500,000 jobs. In 2021, they have the potential to fulfill 100,000 more.    

The reality is that food retailers have historically operated on razor-thin profit margins of less than 2 percent. Still, the industry is a significant economic force in every state and district across the U.S. 

Despite this, our business model often does not allow our members to claim many of the deductions and credits that help companies in other sectors lower their tax rates, sometimes to zero. As a result, we pay billions in taxes every year – our “fair share” and beyond.

Throughout the pandemic, grocers continued to make the investments necessary to keep their doors open, respond to consumer and community needs, maintain safe environments and find ways to make an impact in their communities. 

Amid the ongoing recession, any additional cost for grocers would impede our ability to invest in development plans, such as opening new stores, refurbishing existing operations and investing in technologies and jobs. 

Tax increases for our industry will have a real, measurable effect on our ability to create jobs, give back to our communities, and ultimately drive the economic growth needed to restart the American economy. 

We urge lawmakers to help food retailers adapt to the evolving, post-pandemic economic environment rather than raise taxes, which will hamper our ability to serve our communities.  

Grocers can play a key role in getting people back to work and in revitalizing the American economy, but this will happen only if lawmakers prioritize supporting grocers rather than taxing them at this critical moment.

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