GOP sees political fortunes rise and fall with tax cuts
It's an article of faith among Republicans — reinforced by the party's drubbing in this week's off-year elections in Virginia and New Jersey — that the GOP's electoral fortunes next year hinge on whether they succeed in their longstanding dream to redraft the nation's complex, inefficient tax code.
Without a win on tax reform, the argument goes, Republicans are sunk in next year's midterm elections. Core Republican voters and donors would lose faith. GOP lawmakers would have few accomplishments to run on.
"One of the things you do have to do is pass the things that you ran on," said Rep. Tom Cole, R-Okla., former chair of the campaign committee for House Republicans. "The other side is already whipped up. There's nothing you can do about that. But your own side loses faith and you get a depressed turnout. If you don't get them done, you're guaranteed a bad midterm."
The head of the Republican National Committee, Ronna Romney McDaniel, said GOP voters are looking to see what Congress can achieve.
"I can't say that's going to be the make-or-break of 2018," she said, adding that Republicans are "facing headwinds in the coming midterms."
"I think it's important that we get this done," she added.
Democrats agree that failure on tax reform would be a political disaster for Republicans. But passing the coveted tax measure wouldn't necessarily save them from a bad midterm. The downside risk of failure, both sides say, far exceeds the upside reward.
"Without tax reform I think we're in the minority," said Rep. Mike Simpson, R-Idaho. "But that doesn't mean it'll save us by any stretch of the imagination. I think yesterday kind of demonstrated that."
The pending House bill, little understood by the public, performs poorly in public opinion polls. Voters are generally unenthusiastic about tax cuts for corporations and the wealthy and are skeptical that they'll see a tax cut.
An Associated Press-NORC Center for Public Affairs Research poll taken last month found that people by large margins believe the Trump-backed tax plan helps wealthy people and corporations. Just over four in 10 in the poll said they believe that it helps middle-income individuals and families, slightly more than the number who thinks it hurts them.
Losing Virginia GOP gubernatorial candidate Ed Gillespie ran on a promise of across-the-board tax cuts that failed to catch on.
"We had an experiment on tax cut politics in Virginia through Ed Gillespie's campaign. And the tax cut gambit really fell flat," said Geoff Garin of Hart Research, lead pollster for the campaign of the Democratic governor-elect, Ralph Northam. "If the Republicans think somehow that tax cut politics will heal their problems of having to run with Donald Trump and all the damage they've already done to themselves on health care, the laboratory experiment we had in Virginia yesterday makes it very clear that that will not happen for them."
The tax measure, at least as currently drafted by House Republicans, would impose tax increases on many of the affluent suburban voters who just turned against Republicans not only in Virginia, but in New Jersey and New York's Westchester and Nassau Counties. The measure would repeal a number of deductions cherished by upper middle-income taxpayers, including the state income tax deduction, while limiting the deductibility of mortgage interest on home loans exceeding $500,000.
"Look, it's a lose-lose for them," said Senate Minority Leader Chuck Schumer, D-N.Y. "I think even if they pass the bill, as people learn all the things that are taken away it's going to hurt them. But I think if they can't pass a bill their ability to get things done is questioned, even by the deep Trump supporters. So it's a lose-lose."
Schumer has been urging Republicans to follow the model of the successful 1986 tax reform bill, in which former President Ronald Reagan worked with both Democrats and Republicans to gore special interest provisions while lowering tax rates.
Two weeks after Reagan signed the bill, however, Republicans suffered a drubbing in the 1986 midterms, losing control of the Senate with an eight-seat loss.
In the aftermath of Tuesday's drubbing, Republicans sought to portray an air of calm, cautioning against reading too much into the results in two states — Virginia and New Jersey — that went for Democrat Hillary Clinton in last year's election. They said that passage of their tax overhaul bill would pay off.
"I think that's going to bear fruit politically, but most importantly it's going to help people," said House Speaker Paul Ryan, R-Wis., at a Wednesday morning event held by The Washington Examiner. "If anything, this just puts more pressure on making sure we follow through."
Sen. Chuck Grassley, R-Iowa, said of Virginia: "I see it as a blue state staying blue."
Associated Press writer Tom Beaumont in Des Moines, Iowa, contributed to this report.