Case Study: Stopping the Border Adjustment Tax 

In 2017, as Congress passed sweeping tax reform and among the proposals that were considered during debate, the border adjustment tax (BAT) emerged as a central — and highly controversial — component of the House Republican Tax Reform Blueprint. While the retail industry strongly supported comprehensive tax reform, including a lower corporate rate and a shift to a territorial system, the BAT posed a serious threat to consumers, retailers, and the broader U.S. economy. 

Our association led a coordinated advocacy campaign to ensure that this proposal was ultimately excluded from final tax legislation — a significant policy victory that protected millions of American consumers and jobs. 

The Challenge  

At the time, retailers faced one of the highest effective tax rates of any major industry — 36.4%, the fourth-highest among 18 sectors. The industry supported reforms that would make U.S. businesses more competitive globally. However, the BAT would have undermined those gains by fundamentally reshaping how imports were taxed. 

Under the proposal, companies would no longer be able to deduct the cost of imported goods — effectively imposing a new tax on imports. Even proposals to phase in the tax over five years failed to address its core problems

Our Advocacy Position 

We mobilized quickly to educate policymakers on the real-world consequences of the BAT. Our arguments focused on four key risks: 

1. Higher Prices for Consumers 

Retailers rely on complex global supply chains to deliver affordable goods. Taxing imports would have forced significant price increases on everyday essentials — including food, medicine, clothing, electronics, and home improvement products. These costs would ultimately be borne by American families. 

2. Lack of Domestic Alternatives 

Many imported goods simply do not have U.S.-based substitutes — and won’t in the foreseeable future. This includes life-saving pharmaceuticals and critical tools for small businesses, such as computers and technology products. The BAT would have taxed necessity, not choice. 

3. The Exchange Rate Myth 

Some proponents argued that currency fluctuations would offset higher costs. In reality, this assumption did not hold. Major trading partners like China and Vietnam do not maintain fully floating currencies, and many import contracts are denominated in U.S. dollars. As a result, any theoretical exchange rate adjustment would not meaningfully reduce price increases. 

4. A Disproportionate Burden on Retail Jobs 

Retail is America’s largest private-sector employer. The BAT would have imposed a massive tax increase on the industry — in some cases exceeding companies’ net income. This would have forced businesses to raise prices, cut jobs, or close altogether

The Outcome 

Through sustained advocacy, coalition-building, and direct engagement with lawmakers, we successfully demonstrated that the border adjustment tax would harm consumers, workers, and the economy. 

The final tax reform legislation did not include the BAT

Why It Matters 

This outcome preserved the benefits of tax reform — including a lower corporate rate and a more competitive international tax system — without imposing new costs on American families. 

It also reinforced a critical principle: 

Sound tax policy should support economic growth without disproportionately burdening consumers or key U.S. industries. 

Resources

• Border Adjustment Taxation - the Implications