The controversial border adjustment tax (BAT), which would have taxed imports to the U.S. while exempting exports, was shelved last week.

“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.”

House Speaker Paul Ryan, who has long championed the proposal, conceded that a House tax-reform bill might not include any type of border adjustability measure.

What is border adjustability?

Currently companies are taxed on profits, regardless of where goods and services are sold or made. It is an origin-based tax—one that that taxes goods based on where they are produced, regardless of where they are consumed.  Conversely, a border adjustment tax is a destination-based tax that is one that taxes goods and services based on where they are consumed, regardless of where they are produced.

Who would benefit from BAT?

Under a border adjusted tax, a company that imports its goods would face a tax on the sale of those goods in the U.S., but an American exporter would be exempt from taxation. Consequently, retailers who sell imported wares were against the tax, while exporters generally supported it.

What’s behind the idea of BAT?

The idea behind the border adjustability tax proposal was to discourage companies from moving their operations overseas while creating a revenue stream that would allow corporate tax rates to be slashed. But opponents felt the tax would ultimately hurt consumers because it would likely hurt low- and middle-income Americans more than wealthier consumers.