Republicans, desperate for a win, already face setbacks as they prepare to unveil tax bill this week
 

The Republican effort to overhaul the tax code suffered a bruising setback over the weekend when a powerful corporate interest group came out against the proposal just days ahead of when House leaders plan to release it to the public.

The National Association of Home Builders, after learning that a “homeownership” tax credit it had wanted will not be in an initial version of the bill, is preparing a nationwide campaign against it. The development underscored just how difficult the prospect of a successful tax overhaul will be, given the complex and competing interests that President Trump and GOP lawmakers are trying to serve.

“We will do everything we can to defeat this thing,” said Jerry Howard, chief executive of the National Association of Home Builders.

Trump and Republicans have cast the measure as a once-in-a-generation rewrite of the federal tax code, one they say will stimulate the economy, create millions of jobs and give voters a reason to stick with their party in next year’s midterm elections. Rep. Kevin Brady (R-Tex.), the chairman of the House Ways and Means Committee, is scheduled to reveal the bill Wednesday.


For the president and House Speaker Paul D. Ryan (R-Wis.), the stakes couldn’t be higher. With the approach of the end of their first year controlling the White House and Congress, and the failure of health-care legislation still fresh, Republicans are desperate to post a win before next year’s midterm election cycle begins in earnest. By many of their own accounts, failure to pass tax legislation could lead to an electoral bloodbath, and the end of Ryan’s political career, in 2018.
 

Much of the pressure, and spotlight, will fall on Brady. A bare-pated, unfailingly sunny former Chamber of Commerce executive who is largely unknown outside of Washington after 20 years on Capitol Hill, Brady’s challenge is to build consensus while fellow Republican lawmakers, corporate lobbyists and perhaps even Trump himself pick the bill apart.

Ryan and Brady had been hoping to stave off corporate defections as long as possible, arguing that the plan’s benefits to the economy would outweigh the loss of any industry-specific tax break. But a decision to roll back key itemized deductions has already alienated the home builders as well as the National Association of Realtors, both major lobbying forces on Capitol Hill.


Home builders are considered among the most politically influential groups, as they play a large role in the local economy for virtually every congressional district — and contribute millions to political campaigns. Lawmakers have frequently leaned in whatever direction the home builders have taken.

Howard and Brady’s aides spent weeks working together to add to the bill a “homeownership tax credit,” which essentially would have replaced the mortgage-interest and property-tax deductions, combining both benefits into a new tax credit.

Howard said home builders like other parts of the tax plan, such as tax cuts for businesses and lower rates for many families. But he feared that other changes could tip the housing industry into a recession. He was particularly concerned about ideas to eliminate the federal deduction for state and local taxes and doubling the standard deduction, which could remove incentives for all but the “very wealthy” to deduct their mortgage interest — and have a chilling effect on homeownership.


The homeownership credit had some buy-in from the White House and congressional tax writers, but leaders including Ryan were wary of threatening the bill’s passage by reneging on a pledge they had made for weeks to scores of lawmakers, according to a person familiar with the negotiations — that the mortgage-interest deduction would remain intact.


“Chairman Brady and his staff and [NAHB] worked hours and hours on it and we were very excited about that concept, and all of the sudden on Friday we were told that concept would no longer be considered,” Howard said.

After Brady and Ryan communicated that the changes would not be made, top NAHB officials held an emergency conference call Saturday and agreed unanimously to oppose the bill after months of reserving judgment, a spokesman for the organization said. Now, the group is preparing a public campaign against the bill, with plans to mobilize members in congressional districts across the country.

Brady, in a statement, said the homeownership tax credit could still be added, but the advocates will have to make the case directly to lawmakers.


Republicans also appear poised to limit what American workers will be allowed to contribute pretax to their retirement plans — a change that stands to generate strong opposition. House Majority Leader Kevin McCarthy (R-Calif.) suggested Sunday in a television interview that the GOP is instead looking to increase the limit on post-tax contributions as a substitute.

Currently, Americans can contribute up to $18,000 a year in pretax income to a 401(k). Those contributions are later taxed when withdrawn in retirement. But the GOP plan appears poised to reduce the pretax contribution limit — and increase limits allowed to post-tax accounts. Withdrawals from those accounts are not taxed, meaning the federal government would gain revenue in the short term as a greater portion of initial savings is taxed — but lose revenue in the long term.

McCarthy suggested that the GOP plan would be a boon to middle-class savers. “We’ll expand the amount you can invest, but we’ll also give you an option to not be taxed later in life, not to have that tax burden hanging over you but actually have more income in the future,” he said on Fox News Channel’s “Sunday Morning Futures.”

Other setbacks could quickly follow. The commercial real-estate industry is wary of a proposal to eliminate or scale back the deductibility of corporate interest payments.

Democrats, meanwhile, have not been closely consulted on the bill, and few, if any, are expected to support it.

“This will be a roller coaster,” said Rohit Kumar, a former top domestic policy aide to Senate Majority Leader Mitch McConnell (R-Ky.) who is now a tax lobbyist for PwC, the accounting and consulting firm. “Any major piece of legislation has its brush-with-death moment, and sometimes more than one. But the overriding imperative here is to get a tax bill to the president’s desk and to do so as quickly as possible.”

Negotiators released a broad framework in September, calling for lower individual and corporate rates, elimination of most itemized deductions and an increase in the standard deduction. But the legislation has been kept unusually close for months, and even members of the Ways and Means Committee said last week that they were unaware of how key provisions would work.

“We have no details,” said Rep. Chris Collins (R-N.Y.). “All anyone wants to talk about, especially the business people and so forth, is the tax reform. And I can’t tell them anything, because I have no details. . . . I’ve been very frustrated that all I can say is, ‘It’s going to be good for the economy.’ ”

The gravity of the task is not lost on Brady, 62, who has led the committee since Ryan left the post two years ago to become speaker. Central to the challenge has been making hard choices about which tax breaks to eliminate to make way for the rate cuts that the GOP has promised.

On Saturday, Brady gave ground on the planned elimination of the federal income tax deduction for state and local taxes — a provision that had put Republican House members from New York, New Jersey, California and other high-tax states on edge — agreeing to maintain a deduction for property taxes but not for income or sales taxes.

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