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Republicans stumbled on health care; tax reform won't be any easier

| Monday, July 31, 2017, 7:12 p.m.
Treasury Secretary Steven Mnuchin takes questions as National Security Adviser H.R. McMaster looks on during a daily briefing at the James Brady Press Briefing Room of the White House July 31, 2017 in Washington.
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Treasury Secretary Steven Mnuchin takes questions as National Security Adviser H.R. McMaster looks on during a daily briefing at the James Brady Press Briefing Room of the White House July 31, 2017 in Washington.

WASHINGTON — Republicans reeling from the collapse of their health care overhaul effort badly want a big win — but diverging goals threaten another major party promise, the GOP's relentless push to streamline the nation's tax system.

The White House and congressional leaders want to immediately tackle the first sweeping rewrite of the tax code in a generation. They've united behind a lofty set of goals that includes tax cuts for businesses and everyday Americans, but also a far less complicated tax structure. Treasury Secretary Steve Mnuchin promised Monday tax legislation that will create jobs, boost wages and lead to a "simpler and fair tax system."

"This is about creating a fair tax system that's good for the average, middle-class person," said Mnuchin, who pledged that once the administration and Congress is done, nearly every taxpayer would be able to fill out their taxes on a postcard.

But he's going to find that other conservatives have other tax priorities.

They're the same crowd that sees tax legislation's biggest goal as dramatically slashing taxes — and the size of the federal government.

The goals are not mutually exclusive, but implementing a major tax cut as well as a major rewrite of the entire tax code could become too much too fast — just like health care.

"One of the takeaways of the failure of health care is that we've got to keep the legislation simple and focused," said Steve Moore, a visiting fellow at The Heritage Foundation, a conservative research group.

"You won't find a bigger advocate for a simpler, a flat tax, but getting that done between now and the end of the year? It's not going to happen," said Moore, an outside Trump administration adviser on tax reform.

Moore predicted that the best hope for 2017 is not a big overhaul but a temporary tax cut for individuals and businesses. Though he said he favors trimming out the loopholes and special tax deductions that litter the current tax code, "they all have powerful interest groups and you can take on those interest groups, but for that you've got to lay the groundwork."

Conservatives have been on a crusade to cut taxes for years. During last year's campaign, Trump called for the current seven tax brackets to be consolidated down to three, with a cut in the top rate. Current top rate is 39.6 percent.

Rep. Kevin Brady, R-Texas, the House's top tax writer who chairs the House Ways and Means Committee, is offering plans both for tax cuts and tax overhaul. He wants to flatten out tax brackets and lower rates at every level, but is also proposing a simpler tax system that he said will fit on a postcard.

First, though, will come the big push from the White House and congressional leaders, who are rallying around a plan that emphasizes a revamped tax code that is transparent and treats everyone fairly.

Just as Republicans agreed that the health system was broken, so too do they agree the tax system needs repair. The current system was last overhauled in 1986.

"We've larded it up with special provisions and special tax breaks and it breeds suspicion," said Roberton Williams, a senior fellow at the Urban-Brookings Tax Policy Center at the Urban Institute, a centrist research center. "The result is that everyone thinks everyone else is getting some special break and thinks they should be, too."

What economists want to see, he said, is a "transparent system that everyone understands and believes in."

Currently, more than 90 percent of taxpayers rely on tax preparers or computer software, he said, adding, "It's very clearly a system that is complicated enough that people would love to get rid of it."

The White House and Trump in particular say they're well aware of the mistakes made in the health care fight. On tax code overhaul, Mnuchin said Monday that Trump was "going to be on the road, helping us sell it."

And White House legislative affairs director Marc Short, who said he expects legislation to reach the president's desk by November, said the campaign for tax reform is already getting ramped up.

He and Mnuchin spoke at a panel hosted by the billionaire brothers Charles Koch and David Koch's political network.

None of this, though, will be easy. "We have no illusions how difficult this is going to be, how much of a lift this is going to be," said Tim Phillips, president of the Koch-backed Americans for Prosperity.

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