WASHINGTON — A flurry of late-year legislative activity brought some welcome news to retailers, including long-awaited clarity on the estate tax, extensions of both Bush-era tax cuts and unemployment benefits, and passage of food-safety reform.
Now retailers are hoping that the other shoe drops — in the form of permanent repeal of the tax cuts and a long-term solution for the estate tax.
“We are glad for the extension of the tax cuts for two years, and we wish it were permanent,” Donald Rouse, president of Rouses Supermarkets, Thibodaux, La., told SN, noting that the estate tax in particular is “a big issue” for the family-owned operator. “We see that as a big, big problem for us that we're going to have to deal with.”
Likewise, Mike Needler, chairman and chief executive officer, Fresh Encounter, Findlay, Ohio, told SN that making the Bush tax cuts permanent should be a “front-burner item” for the new Congress.
President Obama signed the two-year extension of the Bush tax cuts after the Senate approved the measure by an 81-19 vote and it passed the House 277-148. The bill also includes a 13-month extension of unemployment benefits.
The estate tax, which is assessed on inherited wealth and family gifts, had expired at the end of 2009 but was reinstated for 2011 at a 35% rate with a $5 million exemption per individual. Without the new bill, the estate tax would have returned at a 55% rate in 2011.
An amendment proposed by some House Democrats that would have set the tax at 45% with a $3.5 million exemption was averted at the last minute, according to reports.
“The estate tax provision is essential to the continued success of family-owned retailers and wholesalers,” said Peter J. Larkin, president and chief executive officer, National Grocers Association, Arlington, Va. “Additionally, the extension of the 2001 and 2003 tax rates is important to the economic recovery by creating jobs and capital for business growth.”
In addition to returning tax rates to previous levels, the new law also allows for businesses to fully write down “productive capital investments” such as those made in delivery trucks and equipment. This “100% expensing” allowance would give companies lower taxable income and encourage investment, according to reports.
Consumers will also see more cash in each paycheck in 2011 thanks to a one-year reduction in Social Security withholding taxes. The payroll tax cut reduces workers' withholding rate to 4.2% from 6.2%.
“This bill plays a critical role in getting the economy moving again,” said Leslie G. Sarasin, president and CEO, Food Marketing Institute. “It will give consumers more money to pay for basic necessities like food, which in turn is good for businesses and results in additional workers hired by businesses.
“It is also necessary to ease the burden of the estate tax on family-owned companies and allow for enhanced depreciation of investments to help businesses get back on the road to recovery.”
President Obama is also expected this month to sign the Food and Drug Association Food Safety Modernization Act, which provides new powers and more resources to the FDA for the protection of the nation's food supply. The measure had to be re-introduced through Congress late last month after procedural errors nullified a previous vote.
“Food retailers and wholesalers believe that given today's global marketplace, it is critical to provide the FDA with the authority to recall products when necessary,” said Sarasin. “We also support the use of third-party certification programs and requiring food safety plans for every company manufacturing food.”