Why lifo matters

Repeal of LIFO would worsen inflation & exacerbate supply chain shortages, reduce economic growth, threaten tens of thousands of existing and new jobs, and be an unreliable source of new tax revenue.  

LIFO helps businesses mitigate inflation and maintain supply chains by providing deferral of tax when inventory is replenished at higher prices. Without LIFO, businesses would delay replenishing inventory, leading to shortages or higher prices for consumers.

LIFO repeal would impose significant retroactive taxes on businesses by taxing them on their LIFO reserves that they have accumulated over the years.  This would tax them on decisions they made years or decades in the past using a fully-authorized and accepted method of accounting. Even if spaced out over time, this tax would wreak havoc on cash flows, capital reserves, expansion opportunities and job creation for American businesses using this method of accounting.  The impact would be particularly pronounced on the hundreds of thousands of small and mid-sized businesses that rely on LIFO. They could be forced to take out costly loans to pay the tax, delay or cancel new hiring or investments, lay-off existing employees, or go out of business. 

Repeal would also significantly hinder the competitiveness of U.S. businesses in the worldwide marketplace by significantly increasing the tax liability of companies that use LIFO.

The effect of the repeal of the LIFO method on American employers would be devastating.