Republicans abandon border-tax proposal

WASHINGTON — The Border Adjustment Tax (BAT), a Trump administration proposal to tax imported goods as a budget-balancing measure, is dead.

In a joint statement on tax reform released July 27, House Speaker Paul Ryan, R-Wis., said he would not pursue the BAT, which faced strong opposition from the retail sector.

Joining Speaker Ryan in the statement were Treasury Secretary Steven Mnuchin; Senate Majority Leader Mitch McConnell, R-Ky.; Senate Finance Committee Chairman Orrin Hatch, R-Utah; House Ways and Means Committee Chairman Kevin Brady, R-Texas; and National Economic Council Director Gary Cohn.

"We are now confident that, without transitioning to a new domestic consumption-based tax system, there is a viable approach for ensuring a level playing field between American and foreign companies and workers, while protecting American jobs and the U.S. tax base," the joint statement said.

"While we have debated the pro-growth benefits of border adjustability, we appreciate that there are many unknowns associated with it and have decided to set this policy aside in order to advance tax reform," it said.

The BAT would have offered tax breaks to U.S. companies that export goods, while adding a tax as high as 20 percent on imported goods.

Virtually all U.S. retailers opposed the BAT, including tire and auto parts retailers, which said they could not survive paying increased taxes on revenue.

In February a coalition of 600-plus trade associations and businesses joined together under the Americans for Affordable Products (AAP) umbrella to lobby against the BAT, arguing that imposing such a tax will result in higher costs for U.S. consumers on everyday items including food, gas and clothing.

U.S. companies heavily dependent on exports supported the tax, while U.S. retreaders saw in the BAT as a possible respite from the competition from low-priced Chinese tires.

Bill Hanvey, president and CEO of the Auto Care Association (ACA), praised the decision to kill the BAT.

"This is great news for our members and the $360 billion auto care industry," Mr. Hanvey said.

Mr. Hanvey thanked ACA members who called, wrote and met with their congressional representatives to oppose the tax.

"We are grateful that we now have the opportunity to work with Congress and the administration to reform the outmoded tax code that is a burden to all of us," he said.

The National Retail Federation (NRF) also praised the removal of the BAT from the tax reform proposal, as did the AAP.

"Today's update on the status of tax reform is very encouraging, particularly since the border adjustment tax is no longer under consideration," NRF President and CEO Matthew Shay said.

"Broadening the tax base and lowering the corporate tax rate will allow our industry to compete effectively in the global marketplace, especially without the additional burden of a Border Adjustment Tax," Mr. Shay said.

The AAP also said it was pleased with the removal of the BAT.

"This framework…reflects the will of America's consumers and employers by eliminating a policy that would have raised costs on families and risked jobs in the largest employment sector in the nation," the coalition said in a statement.

The joint statement on tax reform came in the midst of the Senate debate on whether the Affordable Care Act, also known as Obamacare, should be repealed.

Very early in the morning of July 28, the Senate voted 51-48 to reject a partial or "skinny" repeal, the passage of which would have allowed the Senate to go into conference with the House of Representatives to discuss a joint health care reform package.