Picking themselves up after the bruising collapse of their health care plan, President Trump and Republicans in Congress will start this week on a legislative obstacle course that will be even more arduous: the first overhaul of the tax code in three decades.
Mr. Trump’s inability to make good on his promise to repeal the Affordable Care Act has made the already daunting challenge of tax reform even more difficult.Without killing the Affordable Care Act, Republicans will be unable to rewrite the tax code in the sweeping fashion that the president has called for.
The grand plans of lower rates, fewer loopholes and a tax on imports may have to be scaled back to a big corporate tax cut and possibly an individual tax cut.
A lot of people think Mr. Trump might go for this to get an easy win.
“They have to have a victory here,” said Stephen Moore, a Heritage Foundation economist who advised Mr. Trump during the presidential campaign. “But it is going to have to be a bit less ambitious rather than going for the big bang.”
Because of the arcane rules of lawmaking in Congress, there may be little choice. If Republicans intend to act again without the help of Democrats, they will need to use a procedure called budget reconciliation to have the Senate pass tax legislation with a simple majority. To make their changes to the tax code permanent, their plans cannot add to deficits over a period of 10 years.
Republicans will struggle to reach their goal of cutting corporate tax rates without piling on debt.
But after consuming the first two months of his presidency focused on health care, it is unclear how prepared Mr. Trump and his administration are to tackle taxes. The administration said last month that its tax plan was just weeks away, but nothing materialized. And the Treasury Department, which will take a leading role in crafting a plan, remains understaffed, with crucial policy positions unfilled and most of its leadership still awaiting Senate confirmation.
Mr. Mnuchin said last week that he was ready to get going, predicting that a tax overhaul would be simpler than health care. The fact that no one has seriously tackled tax reform since 1986 suggests otherwise.
“It’s like asking whether climbing Kilimanjaro or another mountain of equal height is harder,” said Mr. Graetz, who was a Treasury Department official in the early 1990s. “They are both very hard, very exhausting and seem to occur once in a generation.”
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