Congressman Mike Thompson (D-CA), a leading Congressional LIFO advocate, had an exchange with Obama Treasury Secretary Jack Lew this week during a House Ways & Means Committee hearing. The unofficial transcript is posted below:
Thompson — My concern on LIFO repeal, as you know, is the retroactive aspect of it. I think if that were to happen it’s going to be very damaging to a lot of businesses who have been playing by the rules, abiding by the law, and they don’t move overseas. Just good business people right here at home trying to make a living and trying to employ people. And if this retroactive component is to take effect it would be very damaging to these folks. I know you passed out the letter you sent to the European Commission and in it you reference the DG for competition. One of your first concerns is that they are changing the procedure and imposing penalties retroactively. I just want you to know that those of us who represent districts that have LIFO companies, LIFO industries. We feel the same heartburn when you talk about retroactively collecting revenues and changing the tax code. So I’d really like to work with you to see if we can’t figure this out and just wonder if you consider the impact of this proposal on small businesses. They’re employers and have you considered ways it could be less disruptive or less burdensome on businesses, if they use LIFO in its existing condition.
Lew – I understand this is an issue of deep concern to businesses in your district and it is in common with other loopholes that we closed in the tax code, something that does impose a burden on those who have benefited from something we believe is something that needs to be fixed in the tax code. The danger of this provision is that it will be implemented over time and that businesses will have the ability to do some averaging so that it doesn’t hit all at once. We don’t view this as retroactive because it’s just a question of timing and not the incidence of the tax burden. So we would look forward to working with you on this. I think one of the reasons tax reform is so hard to do is that it does impose burdens as we close loopholes but we can’t lower the statutory rate if we don’t close the loopholes and make the average lower.
Thompson – I don’t disagree with you on that front, however, when you close a loophole and reach back and then try to collect these revenues from tax laws as they used to be before the change. I think that’s where the rub comes. It would be the same if we change the tax bracket at which you are taxed and went back 5 or 10 years and had you make that up. It just seems inherently unfair and would have a very negative impact on businesses, not just in my district. There are a number of people on this dais, and throughout Congress, who have LIFO companies and it would harm them and their communities.
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Bob Richardson
Senior IPIC Tax Accountant
LIFO-PRO, Inc.
