Donald Trump moves ahead with plans for tax cuts after health care failure

President Trump is leaving behind the failed health care bill and forging ahead with plans for massive tax cuts, but the same forces that doomed the repeal of Obamacare — united opposition from Democrats and divided Republicans — threaten the rest of his ambitious agenda.

Doubts about Mr. Trump’s ability to cut political deals and whether he has willing partners on either side of the aisle have clouded the outlook for not just tax cuts but also his plans for a massive infrastructure program, trade deals and financial reform.

Senate Minority Leader Charles E. Schumer signaled Sunday that Democrats would dig in against Mr. Trump’s plans for the biggest rewrite of the tax code in a generation if, as expected, the across-the-board rate cuts include the wealthy.

“They don’t need another tax break,” he said on ABC’s “This Week.”

He also balked at Mr. Trump’s plan for an infrastructure program and proposed spending reforms.

“It’s not me, it’s him,” said the New York Democrat. “He ran as a populist against the Democratic and Republican establishments. He ran as a defender of the middle class. The minute he got into office he moved so far to the hard right that it’s virtually impossible for us to work with him.”

The painful defeat for Mr. Trump just two months into his presidency also rattled the business community, as the “Trump bump” in the stock markets showed signs of sagging.

“With a setback in health care reform, many market participants are beginning to question whether the Trump administration will be able to follow through with more sizable, and, arguably, more important legislation aimed at jump-starting the consumer and corporate America,” said Lindsey Piegza, chief economist at Stifel Fixed Income.

White House Chief of Staff Reince Priebus insisted that the president’s agenda continues to have broad appeal.

“Moving forward, the president’s vision on lowering taxes for every American is what’s going to unite not just the Republican Party, but I think some of those Democrats are going to come on board as well,” he said on “Fox News Sunday.”

He touted plans for middle-class tax cuts and a border tax.

The plan is expected to call for lowering the corporate tax rate to 20 percent, down from 35 percent, and to cut taxes for the middle class and every income level.

The administration still hasn’t made a commitment on the House Republicans’ border-adjustment tax proposal, which would tax imports and exempt exports, raising more than $1 trillion that could be used to offset tax cuts.

Conservative leaders in the House were looking to support the tax cuts. Likely forecasts of soaring deficits could make that a difficult position to sustain.

When the president gave up on the GOP bill to repeal and replace Obamacare, he also gave up nearly $1 trillion in tax cuts and commensurate spending cuts for Medicaid, measures that would lower the budget baseline and make it easier to cut tax rates without adding federal debt.

Rep. Mark Meadows, chairman of the House Freedom Caucus, which was instrumental in derailing the health care bill, said he didn’t think the tax cuts needed to be “fully offset” to be revenue-neutral in the budget.

“That’s really where it comes down to: Does it have to be what they would say revenue-neutral, or do you have to have an offset like with the border-adjustment tax? I think those are going to be the two questions,” the North Carolina Republican said on the same talk show as Mr. Schumer.

Mr. Meadows argued that tax cuts with help spur economic growth that will increase revenue.

“Tax reform and lowering taxes will create and generate more income, and so we’re looking at those, where the fine balance is,” he said. “But does it have to be fully offset? My personal response is no.”

Some tax reform advocates say the setback, by failing to repeal about $1 trillion in Obamacare taxes, will blunt the impact of any future tax cuts.

Americans for Tax Reform President Grover Norquist said the defeat would leave the administration “$1 trillion short on what you’d want to do on tax reform.”

“Yes, this does make tax reform more difficult. But it doesn’t in any way make it impossible,” said House Speaker Paul D. Ryan, whose political capital took as big a hit as Mr. Trump’s when he pulled the health care bill off the floor Friday.

“We will proceed with tax reform. Obamacare taxes stay with Obamacare. We’re going to go fix the rest of the tax code,” he said. “He’s not going to turn his back on his core principles. I think his core principles have broad admiration in both parties.”

Mr. Trump publicly stated that he remained allied with Mr. Ryan, although conservative voices have begun calling for the replacement of the speaker.

Treasury Secretary Steven T. Mnuchin said the White House is teeing up the tax-reform plan and intends to get it through Congress before lawmakers’ traditional August recess.

“This is optimistic, this is a big challenge, 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 afterwords,” Mr. Mnuchin said at an event last week hosted by Axios.

Predicting that tax reform will be easier to pass through Congress than the failed health care legislation, he said “there’s very, very strong support.”

“I think health care is 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,” he added.

Any rewrite of the tax code will invite an onslaught of pressure from nearly every special interest. Every lobbyist in Washington will see something to gain — and, worse yet, something to lose — in a major tax overhaul.

They’ll exert pressure on lawmakers on both sides of the aisle.

“In each policy area, there are different ways it could go,” Jeffrey Lawson, chief economist at Standard Life Investments, a global asset management firm, said before Mr. Trump and Mr. Ryan called it quits for the GOP health care bill.

“Are you going to get corporate tax reform? Will you get corporate tax reform within a budget [revenue] neutral? How much does Dodd-Frank change? Is there a border-adjustment tax? In every area, there’s very large uncertainty,” he said. “The Republican Party itself is deeply divided on a number of these issues.”

Mr. Trump has vowed to press ahead with the rest of his agenda.