GOP tax plan offers hope, but big hurdles remain

President Trump and top Republicans on Tuesday sought to drum up momentum for their next big legislative push in tax reform, desperate for a win after the GOP’s failure to repeal ObamaCare.

Trump administration officials and Republican leaders are set to release a long-awaited joint tax document Wednesday, which the president will promote in a speech in Indiana. The contours began to emerge on Tuesday, likely three individual tax rates ranging from 12 percent to possibly 35 percent or higher, with a near doubling of the standard deduction.

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Their message: provide tax relief for the middle class, increase business competitiveness and boost economic growth.

After months of starts and re-starts and the dragged-out efforts on health care, Republicans are eager to change the subject. And some kind of legislative success on taxes is now critical to show they can govern ahead of the 2018 midterm elections.

“I can’t tell you how excit[ing] this is, because this is not just a big moment for Congress, it’s a big moment for Americans,” Speaker Paul RyanPaul Davis RyanGOP leaders pitch children's health funding in plan to avert shutdown Lawmakers see shutdown’s odds rising Fix what we’ve got and make Medicare right this year MORE (R-Wis.) said. 

“It’s going to be focused on helping the people in the middle,” he said. “And it’s going to be focused on helping people get to the middle who are struggling to do that.”

Republicans have tried to prevent tax reform from suffering the same fate as health care by having Trump administration officials and congressional leaders develop consensus on key features of a plan.

Popular parts of the plan — cutting tax rates for individuals and businesses and increasing the child care credit — are the easy part.

But even before all the details are out, divisions are emerging.

For example, the plan will likely fund rate cuts in part by nixing or trimming the state and local tax deduction. That break primarily helps big Democratic states, putting Republicans from places like New York and California in an uncomfortable spot.

Taxes were a topic of discussion during House Republicans’ weekly caucus meeting, though the details of the framework will not be discussed with rank-and-file lawmakers until they attend a retreat Wednesday at the National Defense University. 

Trump on Tuesday met at the White House with both Republicans and Democrats on the tax-writing House Ways and Means Committee, encouraging both parties to work together on a tax code rewrite.

“It’s time for both parties to come together and do what is right for the American people and the nation that we all love,” he said.

At the same time, the White House has been actively courting fiscally conservative outside groups, holding dinners and meetings with activists it believes will be critical in achieving tax reform.

“The next 90 days presents literally a once-in-a-generation opportunity to achieve tax reform,” said Americans for Prosperity (AFP) President Tim Phillips, who visited the White House on Monday and was also expected to go there on Tuesday.

The proposed individual rates are likely to be 12, 25 and 35 percent, based on his conversations with officials, according to an AFP spokesman. That would compare to the current seven brackets ranging from 10 percent to 39.6 percent.

AFP has spent $8 million on ads promoting tax reform — mostly focused on tax cuts and the group’s desire to “un-rig the economy.” The group says it has hosted 70 town halls in August and September that have drawn some 15,000 people. AFP also says it has knocked on tens of thousands of doors in the 36 states where it is up and running.

Conservative groups were not always in line with GOP lawmakers during the health care debate but have made it clear that they are behind the Republicans and the White House on taxes.

Rep. Mark Walker (R-N.C.), chairman of the conservative Republican Study Committee, said the group wants to help Ways and Means Committee Chairman Kevin BradyKevin Patrick BradyHouse passes tariff-relief bill GOP may increase IRS’s budget Overnight Finance: Congress barrels toward another shutdown crisis | Canada worries Trump will withdraw from NAFTA | Blue-state Republicans push tax law changes | Chamber CEO calls out Bannon, Warren MORE (R-Texas) “in passing meaningful tax reform for all Americans, but especially the middle class.”

Still, there could be obstacles to achieving unity on taxes from all GOP lawmakers. 

House Freedom Caucus Chairman Mark Meadows (R-N.C.) on Tuesday said he would vote against a bill that set a corporate tax rate above 20 percent and a rate for small businesses at above 25 percent. 

While the framework coming on Wednesday is expected to include rates that are acceptable to Meadows, red lines from lawmakers can constrain negotiations.

Trump’s outreach to Democrats also complicates matters. Congressional Republicans already plan to use reconciliation to fast-track a measure, bypassing the need for Democratic votes.

Treasury Secretary Steven MnuchinSteven Terner MnuchinWeek ahead: Lawmakers eye another short-term spending bill Reagan balanced trade — Trump can, too GOP may increase IRS’s budget MORE signaled on Tuesday that the White House is willing to negotiate on the top tax rate for individuals, according to Rep. Richard Neal (Mass.), the top Democrat on the Ways and Means Committee.

Most Republicans back lowering rates across the board, while Democrats would prefer to keep the top rate for individuals at 39.6 percent. But Meadows and Walker indicated they would be open to maintaining the current top rate.

Still, Republicans are more actively reaching out to Democrats on tax reform than they did on health care, where there was seen to be little room for compromise.

But Democrats were not involved in developing the framework, and they are interested in seeing which income groups ultimately benefit from the plan. 

Nearly all Senate Democrats have signed a letter saying they would oppose any tax bill that cuts taxes for the wealthy and increases the deficit. Many House Democrats feel the same.

“This is a negotiating process so we’re happy to be at the table,” said Rep. John Larson (D-Conn.).

Jonathan Easley contributed.