Sep 28, 2017

Trump skeptical of his own tax plan

Trump speaks in Indianapolis yesterday. Photo: Michael Conroy / AP

President Trump has built an escape hatch from his own tax plan. In Indianapolis yesterday, he bragged that it's the "largest tax cut in our county's history." But in the West Wing earlier, Trump resisted the framework that had been cooked up by congressional leaders, plus economic adviser Gary Cohn and Treasury Secretary Steve Mnuchin.

Why it matters: If Trump shows the fickleness he showed on repeal-and-replace (championing the House plan, then later calling it "mean"), that could increase the chances the plan sinks, with him blaming Congress.

What happened: On Monday, there were some tense moments for Republicans at both ends of Pennsylvania Avenue, as word got out Trump wasn't thrilled with the framework, sources tell Axios' Jonathan Swan.

  • Trump wanted to propose an even lower corporate rate. It's "The Art of the Deal": Don't open the bidding with the number you ultimately want — 20% (the figure announced yesterday), down from 35%. Open with an extreme bid and work back. Trump wanted to propose 15%.
  • Trump was also attuned to the political risks of raising the bottom rate from 10% to 12%, while cutting the top individual rate. (That would shift the pitch to a zero rate with the doubling of the standard deduction, and leave room for a higher top rate. Yesterday's plan could drop the top rate for individuals to 35% from 39.6%.)
  • On Monday, Republicans on the Hill were genuinely uneasy, and thought there was a chance POTUS wouldn't sign off.

Be smart: Tax reform is now an existential issue for House Speaker Ryan and Senate Leader McConnell. If they botch this, as they did health care, both chambers could lose their Republican majorities.

  • Some conservative Republicans worry about a "nightmare scenario" for the party: no health care repeal, no tax reform — and the party's top two accomplishments of this Congress are a "bailout" for insurance companies (fixes to the Affordable Care Act), and "amnesty" ("Dreamer" legislation).
  • That would depress Republicans and excite Democrats — the surest formula for the GOP to blow its majorities.

How it's playing ... USA Today banner, "Trump could reap millions in tax plan: Proposals to cut estate taxes, AMT would benefit wealthy" ... L.A. Times lead story, "Tax plan would hit state hard: GOP proposal would end a big tax break for Californians and may curtail the mortgage interest deduction."

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