Beer, wine and distilled spirits wholesalers are planning a counteroffensive to a White House budget proposal they claim may retroactively tax their businesses $100 billion or more.
The U.S. Chamber of Commerce, the Distilled Sprits Council of the United States, the Wine & Spirits Wholesalers of America and other foes of the administrations budget are dusting off the LIFO Coalition to help beat back President Barack Obamas proposed repeal of last in, first out accounting.
LIFO accounting allows liquor dealers and other wholesalers to expense new inventory not the oldest thereby staving off the bite that inflation takes because newer goods typically are more expensive.
From a financial impact, its the No. 1 priority for us, Craig Wolf, president and CEO of WSWA, said of Obamas budget proposal to repeal LIFO.
Wolf also said that his group will be working through the LIFO Coalition to preserve the accounting practice, educating Members that it was never meant to be a temporary loophole and that the repeal would decimate American jobs during a recession.
In the coming weeks, he said, the coalition will focus on leadership and Members of budgetary and tax-writing panels.
Its a generally accepted accounting principle that has been going on for 70 years. ... So for these companies that have been building up reserves for 70 years, the tax bill would be tremendous, Wolf said.
The White House, which hopes to scuttle LIFO by 2012, estimates the repeal will raise $61 billion. LIFO proponents claim Obamas figure potentially will be dwarfed by how much it could cost businesses.
I dont think anyone really knows what the exact number will be, but it will be a tremendous number, Wolf said.
Tom Quaadman, the executive director of the chambers Center for Capital Markets Competitiveness, estimated that a LIFO repeal could not only cost businesses well over $100 billion, but hit them during already tough times.
Repeal of LIFO would result in a tax increase of tens of billions of dollars on American businesses and would do so in the midst of the worst economic crisis in 75 years, he said. This is really going to [hit] businesses at the worst possible moment.
LIFO was on the chopping block twice during the last Congress: in 2006 to offset a $100-per-family gas tax rebate and in 2007 after House Ways and Means Chairman Charlie Rangel (D-N.Y.) included LIFO repeal in his Mother of All Tax Bills in exchange for lower corporate taxes.
On both occasions, lobbyists were successful in keeping LIFO alive. Still, even if the accounting practice emerges from the budget process, it may not survive a proposal by the Securities and Exchange Commission to adopt a LIFO-free set of international accounting standards.
Vice peddlers arent the only wholesalers singing the blues about the Obama LIFO plan.
The LIFO Coalition includes more than 50 powerful interests, including the Business Roundtable, the National Retail Federation, the National Association of Wholesaler-Distributors and the National Association of Manufacturers.
NAM claims the LIFO repeal would be a double hit on companies.
Its not only a prospective tax increase because they wont be able to use it any more, but its a retroactive tax increase because they will have to take in their LIFO reserve and LIFO reserves are really an accounting entry. Theres no cash there, NAM tax expert Dorothy Coleman said.
Although not yet a concern, the billions of dollars being pumped into the economy may beget inflationary concerns in the future. If so, liquor lobbyists also plan to warn lawmakers that repealing LIFO while the Department of Treasury floods the economy with cash may have a disastrous effect on recovery efforts.
We might be facing significant inflation, Coleman said. That combined with repeal would be devastating.
Visitors get their first look at the American Veterans Disabled for Life Memorial, which opened to the public on Monday, Oct. 6, 2014. The new memorial is located off Independence Ave. SW between the Rayburn House Office Building and HHS. Buy photo here.