Transaction tax

Big Business Lobbying Fuels US Inflation Problems

America’s biggest retailers are raking in huge profits even as the American people struggle to make ends meet. This year, as inflation rates hit 40-year highs, big box stores are looking to make record profit margins. Now, some of those retailers have set their sights on consumer credit cards to further boost their bottom line.

In July, the average price of everyday items like gasoline, groceries and housing was 8.5% higher than a year earlier. These numbers are even more striking when combined with the National Retail Federation’s prediction that retailers will see 6-8% growth in 2022. But that might just scratch the surface.

A recent study by Accountable.US found that big box stores like Kroger, CVS and TJ Maxx were all raising prices unnecessarily during the height of the COVID pandemic and subsequent inflation. Overall, the study found the nation’s 10 largest retailers increased their collective profits by nearly $25 million between 2020 and 2021, a time when the U.S. economy was crippled by COVID shutdowns. .

People stand at the checkout after shopping at a supermarket in Alhambra, California on July 13, 2022.
FREDERIC J. BROWN/AFP via Getty Images

But the record profits go beyond the checkout line and extend to the gas pump as well. On June 14, the national average cost of a gallon of gas soared to more than $5, or nearly 40% of what it costs on the same date in 2021. According to the National Association of Convenience Stores, convenience stores and gas stations set a record for in-store sales last year. They collected a staggering $705.7 billion in revenue.

Now, as Americans pinch their pennies to get by, big retailers and gas station merchants are teaming up to squeeze them with a hidden tax on their credit cards. They are pushing legislation in Congress called the Credit Card Competition Act, which would deprive consumers of credit card choice and put it in the hands of merchants. And if it passes, it will cost consumers dearly.

Currently, when you use your credit card, that transaction takes place on the network you choose. The Credit Card Competition Act would change that. This would allow retailers to choose which network your financial transaction is reported to. The reason they want it so badly? Even more benefits.

Merchants pay a small commission on credit transactions. These fees, known as interchange, are what credit card issuers use to provide consumers with benefits such as no-fee cards, security, cash back and rewards programs. Retailers want to choose the cheapest network available, regardless of the consequences for consumers. This change could result in the loss of access to credit for millions of Americans, higher fees for consumers, less secure transactions, and the loss of other benefits such as cash back programs.

The loss of rewards programs is not just about the wealthy upgrade from business class to first class. A recent study by Axios found that 45% of Americans now rely on credit card rewards programs to pay for everyday expenses. If this legislation becomes law, these Americans will be left with the bag.

Large retailers and merchants have recorded record profit margins in recent years. Congress shouldn’t allow them to take over our credit cards to make even more money.

Bay Buchanan served as 37e United States Treasurer.

The opinions expressed in this article are those of the author.