6 reasons tax reform may not happen this year

GOP's Obamacare replacement bill: Winners and losers
GOP's Obamacare replacement bill: Winners and losers

Despite promises from people in high places, tax reform will not happen by August. In fact, it very well may not happen this year.


1. The calendar

There are less than 42 weeks left in the year. Lawmakers are scheduled to be on recess for 16 of them. That leaves them 26 weeks to get everything done on their long to-do list before the year is out.

2. Everything else on the docket

Before they can even deal with tax reform, Republican leaders are pushing to repeal and replace Obamacare, an effort described as a "political dumpster fire and time suck" by Chris Krueger, a senior policy analyst at the Cowen Washington Research Group.

They also must pass two budgets along with the bills that appropriate the funding called for in those budgets by the end of April and September. If they miss their deadlines because they don't have the votes, the government will shut down, which would further delay their agenda.

Not only that, they have to raise or suspend the debt ceiling no later than the fall, but preferably sooner.

It's still unclear how much time will be spent debating money for the infrastructure investments that President Trump campaigned on. But there is likely to be a lot of fighting over the funding for Trump's proposed wall on the Mexico border. Democrats have suggested if such a "poison pill" is included, they may vote against the budget. Hello, shutdown.

Wait, there's more. Apart from fiscal matters, the Senate still has several confirmation hearings to hold for the president's cabinet and for his Supreme Court nominee Neil Gorsuch.

Lastly, there are committee investigations into Trump's affairs, which have raised many concerns -- from his camp's ties to Russia to his thus far evidence-free, incendiary claim that President Obama wiretapped his phones before the election.

3. Pushback everywhere

It's tough to understate just how difficult it will be to get any one of those things done, let alone all of them.

Political support for the House GOP's repeal-and-replace bill took a decided turn south in the wake of projections by the Congressional Budget Office that the bill would result in 24 million more people being uninsured. Now the White House and Senate are plotting major changes to it.

Meanwhile the budget and debt ceiling debates will be no less fraught. If they also go south, they will suck up time lawmakers don't have if they seriously want to finish tax reform this year.

4. Lack of preparation

Reforming the tax code is a complex, time-consuming endeavor with lots of proposals, public debates and, ultimately, hard-won agreements.

So far, however, there's been only one general proposal put out by House Republicans. Still missing in action a proposal from Senate Republicans or the White House.

5. Clashes ... lots of 'em

If and when a tax reform debate gets under way in earnest there will be a million issues to resolve. But to date only one -- the House-proposed border adjustment tax -- has been sucking up all the oxygen. Some factions of lawmakers and industries are lobbying to kill it while others are backing it. In any case, the expectation is that the current proposal is a no-go in the Senate.

If lawmakers forego the BAT, they also ditch a major revenue raiser intended to offset the cost of the steeply lower rates both the House GOP and Trump want.

Not that all Republicans agree tax cuts should be paid for. But if they do reach consensus that reform be revenue neutral -- i.e., that it must raise the same amount of money as the current tax code -- then it would be to their advantage to repeal Obamacare first. That would lower the bar on how much revenue needs to be raised by reform since repeal would erase $600 billion in Obamacare tax revenue.

6. The skinny from a key player

Senate Majority Leader Mitch McConnell seemed to acknowledge the time squeeze, the crowded agenda, and the complexity of overhauling the code when asked recently by Politico about the Trump administration's goal of tax reform by August.

"I think finishing on tax reform will take longer," McConnell said.

Maybe much longer, according to some policy watchers.

"[House Speaker Paul] Ryan and Treasury Secretary Steven Mnuchin think a deal will win enactment before the August recess. But we have to ask: do they mean August of 2017 or August of 2018? There's no consensus yet on huge issues," joked Greg Valliere, chief global strategist of Horizon Investments.

"[Lawmakers] run the risk of disappointing the markets and voters if little is done by December, but the real deadline is to get something finished ahead of the 2018 election."

What could happen this year

The chance that Trump signs into law a full revamp of both the corporate and individual tax codes this year seems exceedingly low at this point.

Instead, "the new idea is to combine tax reform and tax relief" by year end, Krueger wrote in his daily note. That is, corporate tax reform that's permanent and paid for combined with a package of tax cuts for individuals that is unpaid for but sunsets after 10 years.

Even that may prove ambitious, though, if any one of the other volatile issues on the legislative to-do list blows up.

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