President Trump and a top adviser on Wednesday pushed back plans to overhaul the tax code, saying they wanted to prioritize first a renewed effort to repeal the Affordable Care Act.
The comments from Trump and Office of Management and Budget Director Mick Mulvaney mark a sharp reversal from the administration’s approach just a few weeks ago. After they were dealt a stinging defeat when conservative Republicans refused to vote for a GOP health-care plan, Trump angrily said he was pivoting to tax reform and has been peppering his top economic adviser, Gary Cohn, for details of their tax timeline ever since.
Cohn and his team — as well as top officials at the Treasury Department — have been hard at work trying to put together a tax overhaul blueprint that they believe would lower rates and create more jobs. But Trump — in an interview with Fox Business that aired Wednesday — said the tax effort would now have to wait.
“Health care is going to happen at some point,” Trump said. “Now, if it doesn't happen fast enough, I'll start the taxes. But the tax reform and the tax cuts are better if I can do health care first.”
Many White House officials had already been telling business executives and others that the tax overhaul plan was well underway.
But the new delay is a harsh political reality that White House officials are now accepting. Congressional budget rules make it much easier to pass a broad overhaul of the tax code once the roughly $1 trillion in taxes that are in the Affordable Care Act have already been repealed. So if the health-care law is repealed and replaced, the tax overhaul becomes politically easier.
Trump dismissed this concern several weeks ago following the first failed effort to repeal the health-care law, but he and Mulvaney both said on Wednesday that this was a procedural issue that had now adjusted their approach.
Trump had three major economic priorities that he wanted to push through Congress this year, and all are off to rocky starts. They wanted to pass the health-care repeal, then a tax overhaul, and then a bill that would allow for $1 trillion in new infrastructure spending. Republicans are split on each of these measures, though, and Trump has repeatedly changed the approach for each.
During the campaign, he had said that the infrastructure plan would be a mixture of public and private funding, and Treasury Secretary Steven Mnuchin said the plan would likely require a few hundred billion dollars in public funds.
But in an interview with the New York Times last week, Trump said he might decide to do the entire infrastructure package with public money, borrowing it by issuing debt at low interest rates. And he said he could try to package the infrastructure plan with an effort to repeal the Affordable Care Act as a way to draw in votes from Democrats.
But in his interview that aired Wednesday, the plans seemed to have changed again, saying they would focus anew on passing the health-care repeal and then move on to rewriting the tax code. Mulvaney made similar comments on CNN. Mulvaney said there are both procedural and political reasons to do the health-care repeal first, even though their effort failed once.
“There is the overall momentum,” Mulvaney said. “We think it's more ability to drive the debate on taxes after we fix health care. So I think generally speaking the plan is trying to do health care first.”
Trump’s comments on Fox Business suggested that the tax overhaul effort, despite months of work, still had a long way to go. For example, he was circumspect when asked about a controversial feature of the House GOP tax overhaul plan, called a border adjustment tax. The border adjustment tax would essentially raise taxes on imports but create incentives for exports, something top Republicans believe will encourage more U.S. investment. They have been pushing the White House to endorse the idea. White House officials have been all over the place on the idea, sometimes appearing to back it and other times suggesting it won’t work. Retailers and other businesses have tried hard to kill the idea, saying it will drive up their costs.
Trump, in the interview that aired Wednesday, said, “I haven't really wanted to talk about it. I have my own feelings. I don't like the word adjustment, because our country gets taken advantage of, to use a nice term, by every other country in the world.”
Instead, Trump said he wanted something that he called an “import tax” or a “reciprocal tax” or a “mirror tax” or a “matching tax.”
He floated the idea that the United States would essentially create an identical tax on a country-by-country basis to whatever import levies might be.
“When you say reciprocal tax, nobody can get angry,” he said. “Even the other countries, if like — if they're charging you a 50 percent tax, you say, okay, whatever you charge, we're charging.”
But Trump offered a big caveat on this idea when he added “I'm not saying that's what I'm doing.”
An aide in House Speaker Paul Ryan’s office said that there is still no agreement over a healthcare bill that would have enough votes to pass the House, though members are continuing to talk. The aide said Ryan would still prefer to pass healthcare legislation before turning to tax reform but declined to identify a timetable for doing so.
Rep. Mark Meadows (R-N.C.), chairman of the conservative Freedom Caucus, and Rep. Tom MacArthur (R-N.J.), co-chairman of the moderate Tuesday Group, have been trying to craft a compromise bill, but it remains unclear whether their efforts would bring on board enough members for a bill to pass the House.
Any bill that passes the House would then face additional hurdles in the Senate, where moderate Republicans have expressed opposition to several House provisions.