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The Latest GOP Legislative Loss Is American Stores’ Gain

And bargain shoppers’ too, probably.

Paul Ryan, looking bummed. Photo: Getty Images/Mark Wilson

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The much-opposed, much-misunderstood border adjustment tax is no more — and big American retailers are breathing a sigh of relief.

In what may be seen as yet another legislative defeat for House Speaker Paul Ryan, a group of Congressional Republicans and the White House announced they’re no longer including a border adjustment tax in their tax reform plans. The BAT would have taxed imports while exempting exports and profits earned overseas. The thinking here is that this would incentivize US manufacturing and discourage companies from moving their headquarters out of the US for the lower tax rates. (The BAT shouldn’t be confused, though it often is, with the border tax, a flat 20 percent tax on imports proposed by President Trump to pay for his dream Mexican border wall.)

"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," read a statement released on Thursday. The BAT was part of the “Better Way” tax reform plan proposed in 2016 by Ryan and Kevin Brady (R-TX), the Ways and Means Committee Chairman.

But it had been opposed by major retailers from the start. Big names like Nike, Abercrombie & Fitch, Gap, and Target had been lobbying against the tax, which would especially hurt those companies that manufacture outside the US (which is to say, pretty much all of them) but do most of their sales in the States.

Over 100 American companies teamed up in February to form the group Americans for Affordable Products to fight against BAT, and CEOs from companies including Walmart, Target, Dillard’s, Levi’s, and J.C. Penney traveled to Washington to pressure lawmakers.

Beyond corporations, critics of the BAT within Congress said that by taxing imports, it would also drive up prices on everyday goods, including clothing, for millions of American shoppers — which it very well could have, if stores like Target and J.C. Penney passed on the increased costs to their customers. It could have meant as much as $1,700 per family in the first year alone, according to Americans for Affordable Products.

The National Retail Federation welcomed the news on Thursday with a statement: “Today’s update on the status of tax reform is very encouraging, particularly since the border adjustment tax is no longer under consideration,” said NRF president and CEO Matthew Shay. “By removing this costly element of reform, the way has been cleared for swift action on a middle-class tax cut that will put more money in the wallets of the American taxpayer.”

The NRF also sent a gleeful press release with the email subject line: “BAT is dead...Long live tax reform!” Notably, much of Ryan’s initial tax plan will move forward, including lowering the corporate tax rate. But how that will be accomplished and what the details are remain unknown; the statement on Thursday touts a plan that “creates a system that encourages American companies to bring back jobs and profits trapped overseas” without saying how.

But one thing you can bet is that it will benefit America’s apparel giants. If the death of the BAT indicates anything, it’s that retailers hold serious sway in Washington. And for now, that’s probably good for your shopping habits, too.


Watch: How Your Sneakers Could Cost More, Thanks to Trump