by Mish

Can House Speaker Paul Ryan herd enough House cats in a tax bill that’s also acceptable to the Senate?

The Wall Street Journal reports Republicans’ Tax Overhaul Likely to Face Its Own Slings and Arrows.

"Treasury Secretary Steven Mnuchin said Friday that a tax bill would be “a lot simpler” than a health-care overhaul. “There is very, very strong support.”

But scratch deeper, and the GOP quest for a full overhaul of the tax code is fraught with squabbles, procedural hurdles and difficult trade-offs. The party’s failure on health care—after having seven years to prepare—shows how hard it is for Republicans to write complex legislation that attracts support from their moderate and conservative wings.

“It’s just a reminder of how incredibly hard transformational legislation is,” said John Gimigliano, a former GOP congressional tax aide now at KPMG LLP.

To succeed, Republicans need to bridge at least three big gaps.

First, they need to balance competing desires to cut tax rates sharply and to slow the rise of national debt. Republican leaders in Congress say they want a revenue-neutral plan—one that brings in about as much money as today’s tax system. Faster economic growth might help, but it doesn’t fully bridge the divide. To accomplish revenue neutrality while sharply lowering rates, they will attempt to whack popular tax breaks, such as business deductions of interest on debt and individual state and local tax deductions. They will meet resistance from groups that want to protect those breaks.

Second, they have to reconcile alternate visions of what they are setting out to accomplish and who will benefit. Mr. Trump has said his priority is middle-class tax cuts for individuals. “Not the top 1%,” said Mr. Mnuchin. House Speaker Paul Ryan (R., Wis.) and Ways and Means Chairman Kevin Brady (R., Texas) want an overhaul primarily focused on promoting economic growth, even if that means tax cuts that favor the very top of the income scale. The plans they all campaigned on are tilted to the top, according to independent analyses.

Third, the party is at odds over the Ryan-Brady plan for border adjustment—taxing imports and exempting exports. The Trump administration has been ambivalent and sometimes critical of the idea. Senate Republicans are outright cold to it. Messrs. Ryan and Brady say it’s crucial because it provides about $1 trillion to offset corporate-tax-rate cuts and it discourages companies from shifting profits abroad.

“The notion that tax is easier than health is not borne out by the facts,” said a Senate GOP aide. “Having discussed health care for seven years, Republicans were 75% in agreement on the policy. On tax, none of the foundational questions have been answered.”

The big-picture tax debate—higher taxes vs. lower—breaks down along party lines, but little issues can quickly turn parochial. For example, Republicans from high tax states such as New York and New Jersey may be less willing to kill the state and local tax deduction than their counterparts from Texas and Florida, which lack income taxes.

“A million details come out of the woodwork that you never thought of,” Mr. Gimigliano said."

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