President Trump’s approval ratings took a hit after the House health care replacement plans for Obamacare fell through but tax reform may be the ticket to keeping his base intact. Ronald Reagan managed sweeping tax reforms in his second term and Trump hopes to match that in his first.
The question now is, what battles lie ahead for making tax reform a reality.
The same polls that show his approval ratings down reveal that those who voted for Trump remain loyal. They blame Democrat blind opposition and Republican bungling for the debacle of healthcare reform and are certain their President has what it takes to make his campaign tax reform plans a reality sooner rather than later.
Treasury Secretary Steven Mnuchin said in a press conference last Friday that the White House is likely to release a tax-reform plan “pretty soon.” Mnuchin can be more confident of tax-reform than health care because, unlike the Republican health-care plan, this Trump’s proposal is not a piecemeal approach to relieving Americans of the tax burden.
“This is something,” said Mnuchin, “we are designing … from scratch and running through a lot of scenarios we’ve needed the last two months to work on. We would not have been ready to go a month ago on tax reform, and now we are.”
The Treasury Secretary said President Trump’s objective is nothing short of comprehensive tax reform and not a band aid on a bleeding wound. He also made it plain the President would not depend solely on House Republican leadership to make his tax plan a reality.
Mnuchin told reporters that he is confident that a tax reform bill will be enacted before the August recess in Washington. “This is a big challenge,” he said, “but we’re going to try to get it done on that period of time, and if we don’t we’ll get it done right afterwards,”
Mnuchin added that the White House is calling for a significantly lower corporate tax rate and cut taxes for the middle class, something moderate democrats and most Republicans agree on. Trump’s goal is to ensure a new tax code doesn’t disincentivize investors while at the same time taxing carried interest of hedge-fund managers as ordinary income as opposed to capital gains.
Many point to the success of Ronald Reagan in getting tax reform enacted 30 years ago as a template for our current President. Trump’s election does have many similarities to Reagan’s: a broad base made up of many who were not formerly Republican voters and a grassroots uprising against the insider elites.
But the times are different. In 1986, second term Ronald Reagan had forged solid relationships that crossed the aisle and trustworthy bipartisan support. President Trump has none of those advantages. The Republican Party is divided and his congressional leadership has been humiliated after the health care debacle. Trump has record low approval ratings and Republicans who control all of Washington must going it alone without help from Democrats.
Unlike in ‘86, the President’s own party is not unified in what revising the tax code even means. The President wants “massive tax relief for the middle class” while Congressional leaders want a restructuring that clears away many tax breaks. Leading Republicans are calling for savings to lower tax rates but the top brackets getting most of the benefit.
There are many similarities between 1986 and 2017. When Reagan took office the tax code he inherited was mess cluttered with loopholes with a top rate of 50 percent for individuals. In the years since Reagan’s tax reforms, the loopholes and high tax rates have crept back into the code. Changes under Clinton and Obama have the rate now almost 40 percent.
In ‘86, Congress enjoyed cross-party alliances, numerous Democratic moderates and fewer ideological conservative. Today, Congress is polarized. Now the GOP game plan is to pass tax reform by relying almost exclusively on Republican votes and take advantage of a filibuster-proof Senate.
Mnuchin was optimistic that the healthcare bill would pass but he also said that healthcare and tax reform “are two very different things”. He believed that tax reform is a simpler issue than healthcare.
“We’re able to take the tax code and redesign things, and I think there is very, very strong support,” he said. “I think in healthcare, it’s [a] much, much more complicated issue, where you start out with Obamacare, which had all these issues, and you’re trying to kind of get rid of it and make changes simultaneously.”