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It’s Official: The Wicked BAT is Dead

Retailers the country over can breathe a collective sigh of relief now that the border adjustment tax is officially, fully dead.

The pronouncement came Thursday in a joint statement on tax reform issued by House Speaker Paul Ryan (R-WI), Senate Majority Leader Mitch McConnell (R-KY), Treasury Secretary Steven Mnuchin, and others.

“While we have debated the pro-growth benefits or 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,” the statement noted.

In it’s proposed form, the border adjustment tax, or BAT, would have raised the tax on a $10 garment from $0.35 to $1.40 since cost of goods would no longer have been deductible, though the corporate tax rate would have come down from 35 percent to 20 percent.

It seems, according to the statement, that the Administration came to an agreement—or at least an acknowledgement—that a BAT tax wouldn’t have protected American jobs and industries. Taxes, as the statement addressed, should be “simpler, fairer and lower for hard-working American families.”

The statement also said there should be a lower tax rate for small businesses so they can compete with foreign companies.

“The goal is a plan that reduces tax rates as much as possible, allows unprecedented capital expensing, places a priority on permanence, and creates a system that encourages American companies to bring back jobs and profits trapped overseas. And 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.”

What’s next, according to the leaders on tax reform, will be to develop and draft legislation that will yield what they called “the first comprehensive tax reform in a generation.” They said they expect legislation to move through the committees this fall and then move on for consideration in the House and Senate.

There were no additional details on what that draft legislation might include.

Regardless, the retail sector has cause to unwind at least a little bit.

“The border adjustment tax was a bad idea looking for a place to happen,” American Apparel & Footwear Association president and CEO Rick Helfenbein said. The AAFA had been fighting against the BAT for the time it was on the table. “Luckily it will not happen in the United States of America.”