Trump Faces Difficult Task of Corralling Divided GOP on Tax Reform

The White House claims it is making progress on tax reform and could roll out part of its plan next week, but the president’s increasingly contentious relationship with lawmakers on the Hill has put a pall over the effort’s progress.

President Donald Trump has been using Twitter to blast Senate Majority Leader Mitch McConnell (R-Ky.) and reportedly erupted into a profane shouting match with McConnell during an Aug. 9 phone call.

On Thursday, at the White House’s first on-camera press briefing in August after the president’s New Jersey vacation, the president’s chief spokesperson insisted things are on track. Sarah Huckabee Sanders, the White House press secretary, told the press corps to expect something next week.

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“Tax relief and the focus on tax relief for middle-class Americans is a huge priority for this administration, and certainly going to be a big focus in the fall,” said Sanders. “And we’re going to look at a lot of different ways in which to talk about that and present that to the American people, working with Congress to make sure that happens.”

The news comes on the heels of a report in Politico that the White House and congressional leaders are closer to agreeing on how to pay for cuts in the corporate and individual tax rates.

The ideas, according to Politico, include “capping the mortgage interest deduction for homeowners; scrapping people’s ability to deduct state and local taxes; and eliminating businesses’ ability to deduct interest, while also phasing in so-called full expensing for small businesses that allows them to immediately deduct investments like new equipment or facilities.”

Those ideas are likely to be controversial and will likely stir opposition from lobbyists.

For one, the mortgage interest deduction is heavily supported by the realtors and, depending upon the deepness of the cut, will bring out concern from the powerful real estate lobby.

High-tax states will also protest getting rid of the state-tax deduction. But Republicans will likely push on with that reform, as New York and California are deeply Democratic-controlled states. Right now, taxpayers in low-tax states such as Florida and Tennessee get no such deduction, while California and New York are able to justify their high state taxes and large state budgets because taxpayers can write off their state taxes on federal forms.

Federal taxpayers subsidize states such as California and New York, in effect, according to conservative opponents of the subsidy.

The move to allow small businesses to fully expense investments is perhaps most popular with Republican officeholders, because the GOP believes the move will cause more aggressive spending on new equipment and expansions.

Trump’s most ambitious tax reform goal is to cut the top corporate tax rate from 35 percent to 15 percent.

The question is, has Trump hurt his goodwill with Republican leadership in the Senate too much to get such an ambitious tenet included in the final package? On Wednesday, both Trump and McConnell issued statements indicating that the two men were working together for a common agenda.

On Thursday, as he does often, Trump undid a lot of what his press office did, by tweeting out another stab at McConnell’s record.

“The only problem I have with Mitch McConnell is that, after hearing Repeal & Replace for 7 years, he failed!” Trump tweeted on Thursday morning. “That should NEVER have happened!”

Trump was reminding the world, at a bad time, of perhaps the worst moment of McConnell’s career — the failure to repeal the Affordable Care Act on July 28. McConnell failed to convince Sen. John McCain (R-Ariz.) to vote for a repeal of Obamacare.

Still, there is no indication that Congress is deciding to scuttle tax reform because Trump attacked one of his own, or because of his impolitic remarks on the violence in Charlottesville, Virginia.

On Thursday afternoon, House Speaker Paul Ryan (R-Wis.) said he wants to get tax reform done by Jan. 1, 2018.

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“Our goal is to get it done this year so when you roll out of bed on Jan. 1, 2018, you are experiencing a new tax system so that businesses have the certainty they need to make good business decisions to grow, to invest, to reach and expand,” Ryan said. “That’s why we think we can get 3 percent economic growth in 2018 if in 2017 we get tax reform done — so that’s the plan. Do it this year.”

But there is concern, as with Obamacare repeal, that the GOP-led Congress is in too much of a mess to get it done within one year. Rep. Peter King (R-N.Y.), an ally of Trump, cited another Trump ally in urging the GOP to go with tax cuts only, and wait until 2018 to do a big rewrite of the tax code.

“I agree with Newt Gingrich that GOP must go first with tax cuts and not get bogged down in tax reform,” King tweeted.

(photo credit, homepage and article images: Benoît Prieur, Wikimedia Commons CC BY-SA 4.0 / Gage Skidmore, Flickr)