Trump, GOP look to tax bill for lifeline

Republicans are looking to tax reform for a lifeline after the devastating failure of their effort to repeal and replace ObamaCare.

GOP leaders had raised expectations for ObamaCare repeal, vowing it would pave the way for a sweeping overhaul of the tax code later this year.

That timeline is now out the window.

With the healthcare bill dead and buried, President Trump is in desperate need of a major legislative victory to call his own as he approaches the 100-day mark of his presidency.

{mosads}After House Republicans abandoned the ObamaCare repeal effort Friday, Trump made clear he wants taxes to be the new priority.

“Now we’re going to go for tax reform, which I’ve always liked,” Trump said. 

Trump had suggested that it might have been better to pursue tax reform even earlier, though Treasury Secretary Steven Mnuchin said Friday morning that the administration has needed time to craft a plan. 

The president and other administration officials said they think tax reform will be an easier issue to tackle than healthcare, where Republican consensus proved nearly impossible to achieve.

“We’re able to take the tax code and redesign things, and I think there is very, very strong support,” Mnuchin said at an event hosted by Axios. “I think in healthcare, it’s [a] much, much more complicated issue, where you start out with ObamaCare, which had all these issues, and you’re trying to kind of get rid of it and make changes simultaneously.” 

Marc Gerson, vice chairman of the tax department at Miller & Chevalier and a former tax counsel to the House Ways and Means Committee, said that “you have seen more alignment between the administration and House Republicans” when it comes to what should be done to change the tax system. 

Over the course of the presidential campaign, Trump’s tax plan evolved so it more closely resembled that of House Republicans.

Yet tax reform won’t be easy. Like healthcare, it’s a complex topic that stirs controversy and creates winners and losers. Interest groups and businesses are likely to fight fiercely to protect their favored tax breaks. And lawmakers have pushed to craft tax reform legislation before, only to see the efforts crash and burn.

For Trump, the political costs of a failure on tax reform could be severe.

“It does make a win on tax much more important,” said Rosemary Becchi, a partner at McGuireWoods who has previously worked at the Internal Revenue Service and the Senate Finance Committee. 

The bickering among GOP lawmakers over the ObamaCare repeal is likely to foreshadow the difficulties in finding common ground on tax reform.

House Republicans so far have been taking the lead on tax-reform efforts and have been working on legislation based on a blueprint they released last year. 

But a key part of that plan, known as border adjustment, appears to have little support among Senate Republicans.

Trump has been noncommittal about supporting border adjustment, and Mnuchin said that the administration isn’t looking at the idea “as is.”

It’s also going to be harder for Republicans to achieve tax reform without the enactment of ObamaCare repeal legislation.

The ObamaCare repeal bill would have eliminated most of the 2010 health law’s taxes, which would have lowered the revenue baseline for tax reform. Essentially, with the ObamaCare taxes gone, it would have been easier to pay for lowering tax rates.

Now, if Republicans want to eliminate the ObamaCare taxes as part of tax reform and ensure the bill does not add to the deficit, they will have raise almost $1 trillion in revenue.

Speaker Paul Ryan (R-Wis.) on Friday suggested that Republicans would leave the ObamaCare taxes in place for the time being.

“That just means the ObamaCare taxes stay with ObamaCare,” he said. “We’re going to go fix the rest of the tax code.”

Ryan also pushed back on the idea that the setback on healthcare previews difficulties with other items on the legislative agenda.

“I don’t think this is prologue to other future things, because members realize there are other parts of our agenda that people have even more agreement on what to achieve,” he said. “We have even more agreement on the need and the nature of tax reform, on funding the government, on rebuilding the military, on securing the border.”

While the failure to pass the healthcare bill makes tax reform harder, “it does not in any way make it impossible,” Ryan said.

“We will proceed with tax reform, we will continue with tax reform,” he added.

Given House GOP leadership’s failure to secure the votes to pass the healthcare bill, Trump may decide to take more of a leadership role on tax reform. Mnuchin said that the administration has been working on tax reform for two months and plans to release a plan in the near future. 

House Ways and Means Committee Chairman Kevin Brady (R-Texas) said in a statement that Republicans on his panel “are moving full speed ahead with President Trump on the first pro-growth tax reform in a generation.”

Still, quick action on legislation is unlikely. 

Rep. Kenny Marchant (R-Texas), a member of the Ways and Means panel, told reporters Friday that the text of a tax reform bill is unlikely to be released for weeks.