Dive Brief:

• The White House Thursday released a statement on tax reform jointly with Republican leaders, notably acknowledging that the highly controversial GOP-proposed border adjustment tax is off the table — news retailers have been awaiting for months.

• “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,” according to the statement written jointly by House Speaker Paul Ryan (R-WI), Senate Majority Leader Mitch McConnell (R-KY), Treasury Secretary Steven Mnuchin, National Economic Council Director Gary Cohn, Senate Finance Committee Chairman Orrin Hatch (R-UT), and House Ways and Means Committee Chairman Kevin Brady (R-TX).

• Retail trade associations, including the NRF and the Retail Industry Leaders Association — staunch adversaries of the proposal — praised the decision to kill the 20% tax on imports, which stood to wreak havoc on retail bottom lines, and which the NRF estimates could have cost the average family $1,700 a year.

Dive Insight:

After months of intense lobbying efforts, retailers are collectively high fiving the death of the proposal. “We can now pivot as we have always wanted to to really focus on — getting tax reform done,” Brian Dodge, senior executive vice president of public affairs at RILA, told Retail Dive on Thursday.

There has likely been no greater policy concern in recent memory that rallied the retail industry quite like this. Over the last several months as serious talk of the proposal was hotly debated among members of the House of Representatives, hundreds of retailers banded together to form the Americans for Affordable Products coalition, and many high-profile individual retail executives made a point to address their concerns publicly — a rare move for executives that generally stay out of the political fray.

A group of 10 retail executives, including Target CEO Brian Cornell, Best Buy CEO Hubert Joly and Gap Inc. CEO Art Peck, met with President Donald Trump in February to express their concerns over the measure, which they argued would raise prices for consumers. Then in May, Cornell testified before the House Ways and Means committee against the BAT, saying: “It’s pretty simple math. If the government takes four out of every five dollars we make, there’s no capital to invest and no prospects for growth — and that matters a lot both to us and the U.S. economy. Instead of investing and creating jobs we would be pushed in another direction.”

For Target, the proposal could have caused the big-box retailer's tax rate to more than double from 35% to 75%, Cornell said.  

Following the May hearing, onlookers began to describe the proposal as being “on life support,” and last week at the NRF’s Retail Advocates Summit, Vice President Mike Pence spoke to retailers about tax reform, but notably left out any mention of the BAT.

Pence conveyed Trump’s support for a plan that cuts the corporate tax rate to 15%, implements a territorial tax and brings money back into the United States to grow the economy. “This president is going to work with this Congress this year, and we are going to pass the largest tax cut since the days of Ronald Reagan,” he said.

NRF President and CEO Matthew Shay on Thursday described the move in a statement as “very encouraging” for the industry. “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, he said. “Changing our outdated tax code is fundamental if we are to grow our economy, encourage investment and create jobs.”

While retailers may be taking a minute to celebrate — tax reform isn’t here yet and it remains to be seen whether there are yet more potential conflicts for the retail industry or others, Dodge cautioned. “We're going to need a little time to digest, to understand that, but it's important to remember retailers pay among the highest effective tax rates of all industries, so straight forward tax reform that broadens the base and lowers the rate is what we have long advocated for.”

With BAT dead, the question shifts to alternatives, H. David Rosenbloom, director of the International Tax Program at New York University and attorney at law firm Caplin & Drysdale, told Retail Dive in an email on Thursday. "There are not many [alternatives], and they all pose significant problems of one type or another," he said. "Reducing taxes with no offsetting revenue raisers will just balloon the deficit. Is that really what these guys want?"