Reformers must preserve LIFO

As part of their federal tax reform efforts, White House policymakers and members of the House and Senate tax-writing committees are currently considering repeal of the “last in, first out” (LIFO) accounting method. This proposal would use revenues generated by LIFO repeal to fund other initiatives.  

This move would seriously harm our nation’s manufacturing and metals industry. 

{mosads}The other items lawmakers need funding for cover a broad spectrum, from healthcare taxes to eliminating subsidies for fossil fuel production.  But issue area aside, any proposal to repeal LIFO would create far more problems than it would solve and would have far-reaching consequences for American businesses, and their employees. 

While LIFO is unknown to many Americans, it has been used since the 1940s by companies across numerous U.S. industries to determine both book income and tax liability. Primarily, LIFO is used to manage the cost of inflation. If inventory costs are rising, LIFO is a more accurate way of measuring financial performance and calculating tax. In short, it provides small and large business owners across countless industries with a tool to effectively manage their business.  

Eliminating LIFO would make our tax code less fair and would impose taxes retroactively. Retroactive taxes are bad business, for both employers and politicians. Prospectively, the fiscal health of many in the manufacturing and metals industry would be jeopardized if they could no longer use a trusted accounting method and had to pay a lump sum to the government. 

The unfortunate reality is simple: LIFO repeal would put some companies out of business, resulting in significant job losses. 

Most of those companies would be part of the small business community, a sector of the American economy that Congress should nurture, not harm. As we look to reform our tax code, small business owners across the country would be relieved to know their elected officials will endeavor to protect LIFO and take all repeal proposals off the table. 

There’s a lot of talk in Washington about economic fairness and ending income disparities in America. When it comes to LIFO, lawmakers worried about fairness have a chance to prove to their constituents that they’re serious about this principle. Recent repeal proposals show elected officials are ready to throw important provisions to the wayside to advance their own agendas. Instead, Congress should be focused on initiatives that create opportunity and encourage private-sector growth. 

Preserving LIFO for all American employers, regardless of size or industry, is the first step to fairness. 

Weidner is president and CEO of the Metals Service Center Institute, a nonprofit organization that represents more than 375 companies in the metals industry.