US retailers are refusing to give up in their fight against the proposed border adjustment tax, warning Congress that such a measure would drive up the price of imported merchandise.

In a letter to the House Ways and Means Committee, which is holding a hearing this week on how tax reform would affect individuals and families, the National Retail Federation (NRF) urged Congress to reject the border adjustment tax, or BAT.

Part of the 'Better Way' tax reform plan proposed by House Speaker Paul Ryan, and Committee Chairman Kevin Brady, the BAT would cut corporate income tax to 20% from 35%, but stop companies deducting the cost of imports into the US from their taxable profits. Instead, it would impose a tariff on imports, including raw materials and components used in manufacturing, and exempt exports from the calculation.

In the letter, NRF senior vice president David French points out that the 20% tax would effectively move the US toward a consumption tax structure rather than the current income tax structure.

And he reiterates that US retailers would have no choice but to pass higher costs on to consumers – this could be up to 15% in order to break even. The NRF estimates the average family could pay up to $1,700 more each year.

"Hardest hit would be low and middle-income consumers, especially those on a fixed income," French said.

"The solution for reducing the corporate tax rate should not be to shift the tax burden to individuals and families through the imposition of a consumption tax. Since the overall purpose of pro-growth tax reform should be to improve the standard of living of the American people, it would be counterproductive to include a consumption tax in that plan."

Instead, he believes Congress should focus on reform of the existing income tax system by eliminating deductions and exemptions that benefit only a few industries and using the revenue saved to reduce rates for all businesses.

"The retail industry is a strong proponent of income tax reform. We believe that income tax reform that lowers the rates and broadens the base can provide economic growth for the economy as a whole and can be good for the American consumer. We urge you to reject the border adjustment tax and adopt an income tax reform proposal that does not shift the tax burden to consumers," the letter states.