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Trump’s Tax Reform Plan Faces Tough Challenges

A one-page outline isn't enough to satisfy a Congress interested in the details — and protecting constituents.

Capitol Hill Republicans have greeted President Trump’s tax reform outline with a mix of lukewarm praise and restrained concern, suggesting that one of the administration’s signature agenda items is no slam dunk.

The tepid response doesn’t necessarily doom the proposal, which is extremely light on details. But it does mean that the White House has plenty of work ahead selling – and likely rewriting – the plan in order to win over enough Republican votes.

 

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The outline, which is similar to what Trump proposed on the campaign trail, has many Republicans conflicted. Yes, it meets a central party tenet: Lowering personal and corporate tax rates. But many Republicans also fear that such massive tax cuts would balloon an already large federal debt, something fiscal conservatives are loath to see.

Republican leaders on both sides of the Capitol have put a positive spin on Trump’s plan, saying in a joint statement that its key points will serve as “critical guideposts” for a future overhaul of the tax code. But they’ve stopped short of an all-out embrace.

Republicans say they applaud the president’s effort but can’t fully endorse a plan that’s still a work in progress and missing key details.

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“Truly at the 60,000-foot level, he’s hitting all the same things we are,” says Rep. Chris Collins (R-NY). “It’s right in line with our plan. It’s just there weren’t a lot of details to go with it.”

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“We’re not going to get tax reform done if we don’t get the president engaged, and I’m glad to see the administration engaged,” says Rep. Jim Renacci (R-OH). “One thing we’ve learned is we’ve got to have consensus, we’ve got to bring people together.”

Conspicuously absent from the Trump plan is a border adjustment tax, which would give favorable tax treatment to exporters at the expense of importers. Many Republicans, including House Speaker Paul Ryan, have been pushing hard for the BAT tax as a way to help offset cuts to personal and corporate tax rates.

But Trump has never warmed up to BAT, calling it needlessly complicated. And major retailers that import heavily have pushed back against it.

Some Republicans say that while BAT has its merits, it’s time to move on. “It's my sense that its days are numbered,” says Rep. Joe Barton (R-TX).

As difficult as it’s been for House Republicans to come together on a health care bill, tax reform will be tougher because of regional variations, particularly with the president proposing to do away with deductions for state and local taxes – an idea that is under fire from lawmakers from states with high tax rates.

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“I am not on board with that aspect of it, no,” Rep. Peter King (R-NY) told CNN. “My district in particular, I'm on Long Island, almost the main asset that most people have is their home. These are modest homes, but their property taxes are very high. The state income tax is very high. And so, to them, it would be a net loss in this new tax plan.”

If a plan does make it through the House, where controlling Republicans often are divided on key issues, it will face an even tougher time in the Senate, where the support of at least eight Democrats will be needed.

Both the White House and GOP leaders say they won’t rush tax reform legislation. Instead, they’ll take the next few weeks to hammer out a compromise. That will be easier said than done for this Congress. But one thing is certain: If a tax reform bill does emerge this year – and that’s a big if – it will look different from what the president proposed this week.

 

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