Trump aides try to steer tax reform on Capitol Hill

Donald Trump on tax reform
Donald Trump on tax reform

As President Trump struggles to move on his policy agenda, top administration officials are headed to Capitol Hill Wednesday to talk about tax reform with a group of moderate House Republicans.

White House National Economic Council Director Gary Cohn and Treasury Secretary Steven Mnuchin plan to meet with the Tuesday Group ahead of the first major tax reform hearing scheduled for Thursday, according to two sources familiar with the matter.

The Tuesday Group, a collection of about 50 moderate and centrist lawmakers inside the Republican conference, grew increasingly important during the debate over the GOP efforts to repeal and replace the Affordable Care Act. Their reticence in coming on board to support initial versions of the bill made clear it would not pass.

Ultimately it was one of the group's co-chairs, Rep. Tom MacArthur of New Jersey, who drafted the compromise that led to the bill's eventual passage.

Related: The two biggest ways the Trump family could benefit from his tax plan

In a conference where GOP leaders can afford to lose only 21 members and still pass a bill without Democratic support, the Tuesday Group represents a block that must be kept in the loop and, at times, catered to during what will be a lengthy and arduous process.

Several of the group's members are on the House Ways and Means Committee, the tax writing panel that will hold the first major tax reform hearing on Thursday. The committee's members, who have been meeting weekly for months on the issue, will be crucial to securing the first major steps toward passage for the overall reform package.

President Trump unveiled a spare one-page outline for a tax-code overhaul in April, billing it as a historic proposal.

So far, the White House has insisted that the plan will "pay for itself" through economic growth. But there is no evidence to suggest tax cuts can pay for themselves. At best, growth may make up for a fraction of the cost.

It remains unclear if Trump's proposed changes would be revenue neutral, meaning they wouldn't add to the country's debt. As of now, many outside observers expect that if Congress manages to pass tax legislation it won't be paid for in full, if at all.

Related: Trump calls for dramatic tax cuts for individuals and businesses

Republican lawmakers could splinter if they are asked to back a plan that many economists and budget analysts warn will increase deficits. Fiscal conservatives will need to reconcile their fiscal hawkishness with a plan that could add even more debt to the U.S. economy.

Among his most expensive proposals, Trump wants to cut the business tax rate to 15%.

The rate would apply to both corporations -- which pay a top rate of 35% today -- and to pass-through businesses, which include everything from small businesses to big law firms and investment partnerships. The owners and shareholders of those businesses pay a top rate of 39.6% today.

The Tax Policy Center estimated in November that Trump's 15% proposal for corporations and pass-throughs, coupled with a repeal of the corporate Alternative Minimum Tax, could reduce revenue by nearly $4 trillion in the first decade.

To put that nearly $4 trillion cost in context, that's close to $400 billion a year -- which is more than the $304 billion the government spent last year on income security programs such as food stamps, unemployment benefits and child nutrition.

"This isn't going to be easy. Doing big things never is," Cohn said last month. "We will be attacked from the left and we'll be attacked from the right, but one thing is certain: I would never, ever bet against this president. He will get this done for the American people."

CNNMoney's Jeanne Sahadi contributed to this report.

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