Oppose Repeal of LIFO 

WHY IS REPEAL BAD FOR OUR INDUSTRY?

We estimate half of NAED member companies use LIFO inventory valuation. The marginal increase in their tax liabilities will damage growth prospects.

Distributors would be forced to pay a tax on unrecognized “phantom profits” caused by swings in commodity prices.

A “drop in the bucket” in increased federal revenue is an existential threat to family businesses who have counted on LIFO for decades.

MORE DETAIL:  

Revenue raised by repealing LIFO would only be a tiny fraction of the federal budget: some estimates call for an additional $112 billion in revenue over the next decade, but this amounts to a drop in the bucket of the projected $43.5 trillion in projected federal revenues over the same period. And once the LIFO reserves are no longer available to tax, the revenue to the treasury would be diminished further, and Congress will be coming back to business for a way to make up for the lost revenue, making this essentially a short-term revenue raiser with no other justifications for repeal. LIFO repeal will do more harm than good.

If repealed, companies using LIFO would be forced to report their reserves as income, resulting in a massive incremental tax liability. Additionally, repealing LIFO would mean potentially higher future tax bills and would make it harder for companies to manage inflation.

NAED is a member of the
LIFO Coalition -- a coalition of almost 100 trade associations, business groups and corporations. The LIFO Coalition encourages documenting the following information to present to policy makers on the impact of LIFO repeal:
  • The percentage increase in your tax liability if LIFO were repealed
  • The relationship between your LIFO tax liability and net worth and/or working capital, etc.
  • And where applicable please note the impact repeal would have on jobs (will you have to reduce your workforce or not hire new workers?), capital investments (will you delay or cancel planned investments?), employee benefits (would you have to reduce costs by changing health care benefits or payments to 401(k) plans, etc.?)
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