While completing the entire process by Christmas seems unrealistic, passage of the House version by the end of the year could still be considered reasonable progress and would keep the first quarter in play for final approval. Even if it’s not signed until 2018, the final bill will likely be retroactive to the start of the year.

Low Hurdles, High Hurdles

While we believe that a shared commitment to tax reform among Republicans, the need for a political win, and likely relatively little pushback from constituents makes passage very likely, there is no single bill that would satisfy all stakeholders and compromise is never easy. Here are some of the potential hurdles that may lower the chances of a bill finding its way to the president’s desk:

  • Congressional Republicans (high hurdle) – With majorities in both the House and Senate, congressional Republicans’ ability to achieve a compromise is the only hurdle that really matters. In a two-party system like ours, there’s a wide range of views within each party and common ground on the details may be hard to find. With a narrow majority in the Senate in particular, the bill needs to satisfy multiple wings of the party to get the necessary votes, making the path to acceptable compromise navigable but narrow. Political views aside, members of Congress will also try to defend the regional interests of their constituents. For example, the provision to eliminate the deduction of state and local taxes (SALT) is not popular among House Republicans from high-tax states. (Democrats dominate high-tax states in the Senate.)

  • Reconciliation Instructions (high hurdle) – According to the budget reconciliation instructions, the bill may not add more than $1.5 trillion to the deficit in the next ten years, and it may not add to the deficit at all after year ten. The House draft meets the first requirement; it may not meet the second. While even this $1.5 trillion was a concession by deficit hawks, it means that the bill will have losers as well as winners as the proposed cuts far exceed this total. While limiting the impact on the deficit is a virtue, it will create the battles that are most likely to sink the bill.

  • K Street (high hurdle) – Washington, D.C.’s K Street is the geographical heart of the nation’s lobbyists and advocacy groups, and they will all be trying to advance their constituents’ interests. Groups that have already announced opposition to the House bill include the National Federation of Independent Businesses, the National Association of Homebuilders, and the National Association of Realtors. K Street starts out as a medium hurdle, as some concerns may be addressed as the bill advances, but becomes a higher hurdle as groups have more time to pressure lawmakers.

  • President Trump (low hurdle) – There are two plausible ways that the president can make the bill more difficult to pass. He can undermine its support with distracting or confusing messaging as the bill grinds through the legislative process, as he did at times in the effort to repeal the Affordable Care Act. He can also add to Congress’ legislative burden with items like renegotiating the Iran nuclear deal or responding to the defunding of insurance subsidies. Nevertheless, we don’t expect either of these to derail the process and they can be partially offset by the president’s ability to act as an advocate.

  • Government Shutdown (low hurdle) – Back in September, the president struck a deal with Congressional Democrats to fund the government and temporarily suspend the debt ceiling. Those provisions expire at midnight on December 8. When it comes to the debt ceiling, the government can make use of extraordinary measures to continue to pay its bills without further borrowing, likely pushing a showdown to sometime in March. But funding the government still has a December 8 deadline and requires passing a new spending bill, which will require 60 votes in the Senate, to avoid a shutdown. While shutdowns tend to become unpopular as they become more extended, Democrats could delay progress on tax reform with a temporary shutdown and use the leverage for concessions in the spending bill. This certainly could be a factor in pushing the bill into 2018 but will not derail the entire process.

  • The Mueller Investigation (unlikely hurdle) – The Mueller investigation has the potential to become a hurdle, though we believe it to be unlikely since these types of investigations are slow moving and will probably provide only minor distractions within the timeframe of the bill.
     

When Will The Bill Be Dead?