By Michelle Graff
Washington, D.C.--Republicans in the U.S. House of Representatives are jettisoning the Border Adjustment Tax, the controversial element of their tax reform plan that would have placed a 20 percent levy on all imported goods.

In a joint statement made Thursday, the “Big Six”--the half-dozen politicians spearheading tax reform, a group that includes House Speaker Paul Ryan and Senate Majority Leader Mitch McConnell--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.”

The statement goes on to say that two tax writing committees now will work to develop and draft legislation to overhaul the U.S. tax code that will be on both the House and Senate floors by the fall, and that, “The President fully supports these principles and is committed to this approach.”

Pushed by Ryan, the Border Adjustment Tax, or BAT, called for a 20 percent tax on finished and raw goods and materials brought into the United States from abroad, including items like Italian gold, Burmese rubies and diamonds from countries like Botswana, Canada and Russia.

It was designed as the revenue-raising component of House Republicans’ tax reform plan and championed as a way to give companies an incentive not to move their factories overseas.

But the tax met with resistance, both in the Republican Party and among major retailers and retail groups, which argued it would drive up the costs of their products, costs they would have to pass along to already cash-strapped consumers.

Jewelers of America was among the retail organizations to lobby against BAT, arguing that it would be particularly detrimental to jewelers since so many of the products they source have to come from overseas.

In a statement issued Tuesday, JA President and CEO David J. Bonaparte said: “The Border Adjustment Tax would have been a huge burden on the U.S. jewelry industry, which relies heavily on the import of mined materials like diamonds, precious metals and gemstones. Its removal from tax reform proposals is a big win for our members and the industry.”

There were those in the industry, however, who argued for the tax, claiming that it would help companies that make their products in the United States better compete with those sourcing their goods from overseas markets where labor is cheaper.
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Though the BAT was not officially withdrawn from the Republican tax plan until last Thursday, rumors of the levy’s demise have been circulating for some time.

In May, The Hill described it as being “at death’s door.”  And in mid-June, when JA took its annual lobbying trip to the nation’s capital, its post event wrap-up indicated that BAT was not likely to become law, noting that “the overriding sentiment [about BAT] was that the concept itself is too unpopular and politically volatile to pass.”

Editor's note: This story was updated post-publication to include a statement from Jewelers of America on the removal of the BAT.

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