Could tax reform be the win Republicans are looking for?

While far from a sure thing, the plan isn't as visceral as cutting Medicaid, and could be an easier lift for the GOP than health care. Trump is reaching out to Democrats, and may find some takers, though they generally panned the plan as a gift to the wealthy.

Alex Brandon/AP
President Trump waves before speaking about tax reform at the Farm Bureau Building at the Indiana State Fairgrounds on Sept. 27 in Indianapolis.

Reeling from three failed attempts to “repeal and replace” Obamacare, Republicans are looking to score a political win before the year’s end with an issue they hope will be more unifying for the party: tax reform.

President Trump hit the road in Indiana Wednesday to promote the framework of his tax plan, while Republicans back in Washington talked it up as well. With many details and legislative language still to fill in, they are touting what they say is a simpler, fairer tax code geared toward the middle class and designed to make American businesses more competitive globally.

Notably, Mr. Trump is taking a different approach than he did on health care. The White House has tried to bridge differences between the GOP’s warring factions in advance of the rollout. And Trump has been reaching out to – and pressuring – Democrats, hoping at least some of them will come on board.

In Indiana, the president characterized the plan as a “miracle for the middle class, for the working person” as Sen. Joe Donnelly, a Democrat up for reelection, looked on. Trump said he expected “numerous” Democrats to come on board. If Senator Donnelly doesn’t approve it, “we will come here, we will campaign against him like you wouldn’t believe,” he said, breaking into a big grin and waving his arm in a kind of "just kidding" (though not) gesture.

Easier sell than health care

None of this guarantees an easy road to passage. But there are reasons to believe that a tax package could succeed where the various Obamacare repeal attempts failed. Politically, it is much easier for lawmakers to hand voters a tax cut than to potentially take away their health-care coverage. And while taxes certainly affect people directly, the issue doesn’t have the same raw emotional resonance as health care.

“No one can claim that somebody is going to die as a result of tax reform,” says Rep. Carlos Curbelo (R) of Florida, who is on the House Ways and Means tax writing committee.

That said, success is far from guaranteed.

Looming over everything are the details still to be worked out, and the question of how to pay for the estimated $5.8 trillion in tax cuts, which is no small matter. The plan would reduce the number of tax brackets from seven to three – 12, 25, and 35 percent – and doubles the standard deduction for individuals. No income levels have been set for the brackets, which might eventually include a fourth, higher bracket for top earners.

On the corporate side, taxes would drop from 35 percent to 20 percent, while small businesses would pay no more than 25 percent.  

Kevin Lamarque/Reuters
Senate Democratic leader Chuck Schumer, (l.) and Sen. Ron Wyden (D) of Oregon, the ranking Democrat on the Senate Finance Committee, speak about the Republican tax plan in the Capitol in Washington on Sept. 27.

There are also procedural hurdles. To launch the reform effort, Republicans first have to draw up a budget plan. As with health care, they expect to use a process that would require only a majority – as opposed to 60 votes – to pass the tax overhaul. But there is already some disagreement over the process, with some lawmakers wanting to see more tax plan details up front.

Still, the White House seems to have learned from its triple failure over health care (the third attempt at “repeal and replace” went down in the Senate on Tuesday for lack of GOP votes). Talks leading up to Wednesday’s rollout involved key Republicans from both chambers and the Treasury secretary and economic adviser to the president – the so-called “Big Six.”

A good sign for Republicans: The hard-line House Freedom Caucus officially endorsed the framework and said it would support the GOP budget.

“We’re more united,” says Rep. Tom Cole (R) of Oklahoma. The “stumble” on health care in the Senate makes it imperative to pass tax reform, he says. “I think everyone is savvy enough politically to understand that.”

Over the summer, the White House also worked to build bridges with outside conservative groups like Club for Growth and Americans for Prosperity. “That is a lesson learned” from the health-care experience, when certain conservative activists attacked “repeal and replace” efforts before the president even took office, White House legislative director Marc Short told reporters at a Monitor breakfast this month.

Actively wooing Democrats

Another difference: The president is more engaged on tax reform and actively reaching out to Democrats – or pressuring them.

Trump’s trip to Indiana was his third foray into a red state where a Democratic senator is up for reelection next year. The president actually began his tax sales pitch at the end of August in Missouri, home state of endangered Democratic Sen. Claire McCaskill. Days later, he headed to North Dakota with Democratic Sen. Heidi Heitkamp hitching a ride on Air Force One.

“I’m probably as moderate as they come here,” says Senator Heitkamp. On health care, she says, “there was very little outreach if any from the other side. That’s not true in tax reform. I see a willingness.”

On Tuesday, the president invited a bipartisan group of Ways and Means committee members to the White House to talk taxes – his idea, said those who attended. It is a far cry from the kind of slow, bipartisan upfront work that produced the last big tax reform of 1986, under President Ronald Reagan. But the president made it clear at the meeting that there was room for negotiation, said Rep. John Larson (D) of Connecticut, who attended.

“If he said it once, he said it a dozen times, about the need to do this bipartisanly. So we take him at his word,” Congressman Larson told reporters Tuesday. At the meeting, Democrats voiced their main concerns: that the tax cuts be paid for, and that gains don’t go to the wealthy.

On Wednesday, Democratic leaders in Congress lambasted the plan, saying it’s not what the president claims it to be. In remarks on the Senate floor, minority leader Charles Schumer (D) of New York said it would result in “a massive windfall for the wealthiest Americans and provide almost no relief to middle-class taxpayers who need it the most.”

And it will add $2.2 trillion to the national debt over 10 years, according to an estimate by the Committee for a Responsible Federal Budget, a watchdog group.

Even if it’s not possible to bring Democrats fully on board, individual Democratic lawmakers might be enticed to vote for the plan, since tax reform is far less divisive and ideological than health care. Democrats might be needed if some Republicans peel off.

“Americans are genuinely divided over whether Obamacare works or not, but no one’s defending this horrible, costly, complex tax code that’s filled with special-interest loopholes,” Rep. Kevin Brady (R) of Texas, the chairman of the Ways and Means Committee, told reporters Tuesday.

Of course, closing a loophole is going to hurt someone. Howls have already been heard over the proposal to eliminate the deduction for state-and-local taxes, though charitable and mortgage deductions would remain. But closing a loophole is not the same as taking away a person’s Medicaid. And few voters would object to being handed a tax cut.

“If you’re [Senator] Heitkamp, your electorate likes Trump to begin with. A lot of Democrats don’t like the idea of collaborating with Trump, but if she gets goodies for the state, that’s a good deal for her,” says John Pitney, a congressional expert at Claremont McKenna College in Claremont, Calif.

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