Some groups have recently revived the idea of a border adjustment tax as a “smarter alternative” to tariffs or international rules like the global intangible low-taxed income tax and the base-erosion and anti-abuse tax. Their pitch is that a BAT would raise significant revenue, reward domestic production and help the United States avoid trade wars.
They are trying to reframe the debate: Better a BAT than tariffs, better a BAT than GILTI.
But the reality is the same as it was in 2017. A border adjustment tax is another name for a tariff, and consumers pay the price.
The last serious push for a border adjustment tax came in the lead-up to the Tax Cuts and Jobs Act. At the time, it was touted as a way to raise revenue, discourage offshoring and give U.S. exports an edge. But once the details came out, retailers, refiners, automakers and consumer advocates united in opposition.
The politics were brutal. The House tax writers took the brunt of the backlash as opponents made a simple, compelling case: The BAT would raise consumer prices on everyday goods. From groceries to clothing to electronics, families would pay more.
In the end, the BAT collapsed under that political pressure. The lesson was clear. When you tax imports in a consumer-driven economy, voters notice.
Proponents still argue that a BAT or a value-added tax would raise large sums of revenue without raising rates, tax goods where they’re consumed — not where they’re produced — and exempt exports, which looks “pro-growth.”
That’s the math. But tax policy isn’t just math — it’s politics. And politically, BATs and VATs are a losing hand.
A BAT imposes a tax of 20% or more on imports for retailers and American families. That means higher prices on everyday essentials. Economists might argue that currency adjustments would cancel out the cost, but that’s never been persuasive outside of a classroom.
The truth is that BATs and VATs are regressive taxes. They fall hardest on working families who spend a larger share of their income on goods. That makes them politically toxic.
Tariffs share the same flaw: They are also regressive, raising costs on everyday items for those least able to absorb them. The key difference, however, is that tariffs are usually temporary tools — while a BAT would be baked permanently into the tax code.
Some advocates are trying to frame the choice as tariffs versus BATs or GILTIs versus BATs. That’s a false choice. Policymakers don’t need to choose between blunt tariffs and a hidden consumption tax.
There’s a better way:
Reject tariffs or BATs that punish families
Maintain a competitive corporate rate that attracts investment and raises revenue through growth
Restrain spending to avoid creating pressure for damaging new revenue schemes
Border adjustment taxes and value-added taxes are bad policy and bad politics. They failed in 2017 because consumers and retailers made their voices heard. The politics haven’t changed. The next big tax debate should focus on competitiveness, growth and protecting families — not a permanent and costly tax on goods that Americans can’t afford.
