Why The New Tax Bill May Drive Retailers To Hire Less, Automate More

The cashier may be automated faster thanks to the tax bill. Under the Tax Cuts and Jobs Act, which President Donald Trump signed into law on Friday, the effective cost of buying new equipment will drop and savings from reducing payroll costs could jump by at least 20 percent. In other words: Buying labor-replacing machinery may be cheaper and firing employees may save more money. Up to 7.5 million retail industry jobs are vulnerable to automation within 10 years, the Cornerstone Capital Group wrote in May. Retailers have for years toyed with technology to automate anything from warehouses to check out, in hopes of saving money, space and time. Amazon has been perfecting its AmazonGo, stores without checkout lines or cashiers, and Walmart is testing similar technology, through its start-up incubator, Store No. 8, according to Recode. The investments required for automation, though, can be steep and the returns are not always offset by short-term labor savings. The math could change under the new tax law. Under the law, companies will now be able to write off the cost of new equipment immediately rather than over an extended time, thereby lowering their short-term taxes. Because money is worth more now than in the future (the time value of money), they will save more in the long run from deductions than they would have previously. With this provision set to begin to phase out in five years, retailers looking to automate are under the gun. “If prices of equipment don’t change, you might see companies accelerate plans to buy equipment they were already thinking about buying,” said Corey Goodman, a partner in the tax department of law firm Cleary Gottlieb Steen & Hamilton. “If a company is planning on investing in equipment, the tax savings will be greater doing it sooner rather than later.” Read more at Yahoo! Finance.