Obamacare repeal fails: Will Mnuchin tax reforms fare better?

After an effort to 'repeal and replace' Obamacare fell through on Friday, the White House is looking ahead to tax reform. Why Treasury Secretary Steven Mnuchin seems optimistic.

Evan Vucci/AP/File
Treasury Secretary Steven Mnuchin listens at right as President Donald Trump speaks during a meeting on the Federal budget in the Roosevelt Room of the White House in Washington, DC in February. Mr. Trump wants to tackle tax reform, but the loss on health care deals a blow to that effort.

House Republicans’ effort to ‘repeal and replace’ Obamacare fell through on Friday, but the White House’s ambitious agenda is still alive. Up next: Tax reform.

Speaking Friday at a Washington event hosted by news site Axios, Treasury Secretary Steven Mnuchin said he expected the White House to release its tax plan “pretty soon.” The plan, he indicated, is the culmination of two months’ work that has looked at a range of possible tax scenarios.

Though the details still remain to be hammered out in consultation with Congress, the stated goal is to cut federal tax rates for middle-income Americans. Secretary Mnuchin’s signature policy calls for wealthy Americans to continue paying the same level of taxes, though an end to certain deductions would mean the tax burden would be distributed differently, something he called a “goal” on Friday. President Trump, meanwhile, has long promised a cut in the corporate tax rate from 35 percent to 15 percent.

The failure to reform healthcare, observers caution, might limit the possibilities of a tax overhaul. The two are linked, and not just politically. But Mnuchin suggests that tax reform would fare better than healthcare, describing it as a more straightforward issue and citing bipartisan support for a simplified tax code.

"We're able to take the tax code and redesign things, and I think there is very, very strong support," Mnuchin said before the healthcare reform vote was canceled, The Hill reported. ”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."

In contrast to Obamacare, both parties agree that the tax code is broken, and that something needs to be done to fix it. But exactly what shape these reforms should take is heavily debated. That’s why, even though comprehensive tax reform was been a target of both the George W. Bush and Obama administrations, both ultimately settled for more modest changes. In fact, an overhaul on the scale sought by the Trump administration has not passed since 1986.

But the White House appears unwilling to settle for less than complete reform. The tax code is one of Mr. Trump’s top issues, and Mnuchin indicated Friday that piecemeal changes would be insufficient.

"We are not cutting this up and doing little pieces at a time," Mnuchin said, according to the Associated Press.

But given the political setback on healthcare reform, comprehensive tax reform may no longer be possible, some observers say. Infrastructure reform may have been jeopardized, too.

"The defeat of health care reconciliation threatens to derail the entire Trump economic plan. Period,” Steve Bell, a longtime staffer on the Senate Budget Committee and now an economic policy advisor at the Bipartisan Policy Center in Washington, D.C., told CNN Money.

Congressional Republicans had expected to use the $1 trillion in saved Obamacare taxes to help finance tax cuts, which was part of the reason healthcare reform was attempted before tax reform. Without those funds, it may become harder to sell Congress on tax reductions.

But others remain optimistic. Speaking after the healthcare vote was cancelled on Friday, House Speaker Paul Ryan (R) of Wisconsin said the reform agenda was still on course.

“This does make tax reform more difficult, but it does not in any way make it impossible,” he said at a news conference, Politico reported. “We will proceed with tax reform.”

Having lost one key battle, Ryan added, may have given congressional Republicans greater impetus to win the tax reform fight. 

“Every man and woman in this conference is motivated more than ever to step up our game,” he said, CNN Money reported.

Members of the House Ways and Means Committee, which is responsible for writing tax legislation, are ready to get started.

“Tuesday morning is our first tax reform meeting,” committee member Kenny Marchant (R) of Texas told Politico.

Mnuchin said he hoped the tax overhaul would be completed before Congress’ August recess. If not, he added, it would “absolutely” be done in the fall.

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