Despite the partisan disagreement over tax rates and other policy items, Democrats and Republicans share at least one thing in common: They all visit their local supermarkets to buy groceries.
Regardless of where we stand politically, nearly all Americans rely on food retailers to stock their kitchens and feed our families. From the largest national chains to the smallest independent grocers, the food retail industry serves as the backbone of the U.S. economy, enriching lives with nutritious, safe, and affordable food.
But because of the way their industry works, our food retailers currently suffer unique disadvantages imposed by the U.S. tax code. According to newly released data from the Food Marketing Institute, the food retail industry pays more than $153 billion in total federal and state taxes each year, while the direct, indirect, and induced contributions of the sector equate to roughly 5 percent of total U.S. GDP.
Food retailers employ more than 4.8 million workers and produce over $363 billion in direct economic activity to their local economies. They pay nearly $168 billion in wages to their hardworking associates. In all, food retail is a remarkably diverse industry that strives each day to make a positive difference in the local communities they serve.
And this isn’t just empty rhetoric. An impressively high percentage of the Food Marketing Institute’s board of directors began some 25 or 30 years ago as baggers or cashiers, continued to grow in management within the industry, and ultimately advanced to become CEOs of their respective companies. Simply put, all Americans — from employees and their families to customers — rely on the industry’s success.
But the $153 billion tax burden makes it exceedingly difficult for food retailers to hire new employees, raise wages for current workers, and meet the demands of the changing consumer and new marketplace. For each person food retailers employ, they pay nearly $32,000 in taxes.
Low profit margins compound this burden, as the average food retailer only nets 1 percent of its business income after accounting for taxes, overhead, and other costs. Since food retail is uniquely low-margin, government-imposed business costs affect the industry disproportionately.
Food retailers, like all businesses, appreciate their responsibility to supply government revenue and support public projects, from roads and bridges to law enforcement. But while other industries can secure deductions for research and development costs, food retailers are generally stuck paying standard tax rates. A tax system full of loopholes that picks winners and losers thus puts undue pressure on our nation’s grocery stores.
Overall, the industry pays an average effective tax rate of 33 percent, but independent grocers can pay even more. Unlike industries dominated by large corporations, many independent grocers are pass-through small businesses, whose tax rates land at the top individual rate. Combining federal, state, and local taxes, the burden often reaches 50 percent.
A tax system that punishes food retailers and other job creators is counterproductive. Excessively high taxes only erect barriers between employers and career opportunities for employees, as well as financial security for their families.
Much-needed tax reform in this country is not about reckless tax cuts; it’s about tax fairness. As Democrats and Republicans negotiate the specifics of tax reform, they must keep their favorite grocery stores in mind. Food retailers set the table for economic growth.
Leslie G. Sarasin is president and CEO of the Food Marketing Institute.
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