While Health Care Divides The Party, Republicans Hope Tax Cuts Will Unite

By Gerald F. Seib Features Dow Jones Newswires

There are lots of reasons the Trump White House will be glad when it can finally get past the tortured debate over health care and move on to tax reform, but a principal one is this: Health care is pulling apart the various strands of the Republican coalition. Tax cuts could unite them.

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Today's Republican coalition weaves together three distinct philosophical strands: the populists/nationalists, the movement conservatives and the Wall Street/establishment conservatives. All three are well represented within the Trump administration -- indeed, within the Trump White House itself -- which is one reason it has had a hard time projecting ideological coherence.

The health-care debate has been a seven-month migraine that pulls apart those strands of the Republican coalition.

The populists/nationalists are troubled by the idea of rolling back the Affordable Care Act's taxes on the wealthy while cutting Medicaid funding and insurance subsidies that benefit some core elements of President Donald Trump's 2016 constituency.

Movement conservatives want a complete uprooting of Obamacare and far more reliance on market forces in the health sector. The party's establishment wing, meantime, could live with some kind of compromise, if there were one that could satisfy the others.

That problem has been made worse by the fact that the Trump White House has been left either defending or trying to sell somebody else's idea of a repeal-and-replace plan, because it doesn't have one of its own. That has produced the spectacle of the president occasionally championing and then criticizing the very same proposal; supporting competing ideas; and backing plans that would hurt many Trump voters.

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Mr. Trump has never offered a sustained public defense of any of the various approaches Republicans have tried. He owns none of them, and has left the impression than any will do.

Unfortunately for the GOP, the magic compromise that skirts past these differences has proven elusive. And now it appears the agonizing search for one is going to drag on. Republicans' margin for error in the Senate is so small that they are putting off debate and a vote on a health bill while Sen. John McCain of Arizona recovers from unexpected surgery.

Tax reform holds out the prospect of something different.

For starters, the Trump administration will be selling a tax plan of its own, and, with luck, one precooked with congressional leaders, rather than hoping somebody else presents one that is acceptable. That alone would change the dynamic.

More broadly, the belief that it is essential to revamp the tax system to lower tax rates, especially corporate rates, is as close to gospel as you can reach in today's Republican party. Nothing unifies Republicans like cutting taxes.

Even the populist/nationalist wing agrees with the Wall Street/establishment wing on that notion. And that's especially true if, as the administration has promised, lower corporate rates can married to a broad-based tax cut that will help the middle class, financed by closing tax breaks for businesses and at the top end of the income ladder.

That isn't to say changing the tax code is simple -- not by a long shot. There certainly are intra-Republican differences.

Most notably, House Speaker Paul Ryan and Ways and Means Chairman Kevin Brady have long been pushing the idea of building a new tax system around a border-adjustable tax -- a tax that essentially imposes a levy on imports while letting exports leave the country tax-free. The idea is to both build domestic industries and supply chains while also raising a big chunk of revenue to finance tax cuts elsewhere.

That idea does, in fact, split the GOP coalition. Parts of the establishment wing hate it because it would hurt industries that rely on imported goods; the populist/nationalist wing likes the way it could promote American manufacturing, but is leery of how it would drive up costs for products that working-class America buys at Wal-Mart; and the Trump White House thinks it's too complicated.

But the reality is that, because of such misgivings, the border tax probably has been a dead letter for months now, though its proponents haven't given up. The Trump team will try to steer the conversation in a different direction.

There are plenty of other complications. If tax reform were simple, three decades wouldn't have passed since the last significant one. And the prospect of finding Democratic support is nearly as bleak as it has been on health care.

Still, the fundamental idea of lowering rates and simplifying the tax code is one Republicans are almost desperate to rally around. If that holds true, we'll be left to ponder how different the story of Mr. Trump's first year might have been if Republicans had been able to start with an idea that united them rather than one that divided them.

Write to Gerald F. Seib at jerry.seib@wsj.com

(END) Dow Jones Newswires

July 17, 2017 11:32 ET (15:32 GMT)