President Trump and Republican leaders could have lowered their ambitions for tax reform. After debating options for nine months without much visible progress, they might have decided to avoid aggressive tax rate cuts, or settled for a narrow bill focused on mollifying big businesses' most pressing demands.
Instead, they set their sights on bold, supply-side tax reform, setting goals that thrill the most conservative members of the party. But this brand of reform will also require a series of extremely tough choices and decisions from the party's rank-and-file.
In effect, Trump and party leadership decided to go over the waterfall in a barrel, and have strapped the GOP on with them for the ride.
"This is a once-in-a-generation opportunity," Trump told the crowd and accompanying members of Congress at a speech in Indianapolis unveiling the plan last week.
The plan is to lower individual tax rates, and to cut the corporate income tax rate from 35 percent to 20 percent, bringing it below the average for developed nations.
It would go far beyond those long-sought GOP priorities, though. The reform plan would create a special new tax rate for partnerships, sole proprietorships, and limited liability corporations, lowering their top rate from 44.6 percent to 25 percent.
But the tax cuts don't stop there. For at least five years, businesses would be allowed to immediately write off the cost of all new purchases of equipment. Individuals would see the estate tax and the Alternative Minimum Tax disappear.
Altogether, those tax cuts total around $5.8 trillion over 10 years, according to a preliminary, rough estimate from the Committee for a Responsible Federal Budget.
Doling out tax cuts is the pleasant part. The problem is the other side of the equation: Offsetting the cuts by eliminating tax breaks and loopholes.
"The question is: Will we have the political will to do it?" asked Sen. Pat Toomey, a Pennsylvania Republican who sits on the Finance Committee.
A long-time conservative, Toomey lobbied for the plan to be bold and sweeping.
Others counseled a less ambitious approach. Sen. Pat Roberts of Kansas, for example, had suggested that Republicans simply lower tax rates and eliminate the estate tax, and "call it good."
But the course is now set for the harder challenge.
Simply adding all the tax cuts they want to the deficit isn't an option, and the GOP will be constrained by budget procedure. To pass the tax bill, they plan to use the budget procedure of reconciliation, which allows them to pass bills with only 51 votes in the Senate, bypassing a Democratic filibuster.
So, on the one hand, the tool allows them to avoid having to court a dozen or so Democrats to vote for the bill.
"They can't filibuster it," House Speaker Paul Ryan explained in an interview on Fox News. "And that's why I think we're going to get it done."
On the other hand, Republicans will have to abide by the rules written in the budget for the tax bill, which are likely to limit the amount that the plan can add to the deficit.
Toomey and Sen. Bob Corker of Tennessee, both members of the Senate Budget Committee, struck a deal to limit net tax cuts in the reconciliation bill to $1.5 trillion. If they sketch out $5.8 trillion in gross tax cuts, that means they have to come up with over $4 trillion in offsets by eliminating tax breaks and closing loopholes.
Nor can Trump and Ryan budge much on the other end, and back away from the tax rate targets. If they do, they are sure to lose support from conservatives.
"Not only do I feel sure we'll hit those targets, I've been promised that we'll hit those targets," said Rep. Mark Meadows, the North Carolina Republican who chairs the House Freedom Caucus, the group of conservatives who have defied leadership in the past.
"We told [Congress] that if we start at 20 [percent], we're ending at 20, and there's not room to negotiate," said Gary Cohn, Trump's National Economic Council director, in an interview on CNBC.
So they are forced to take on tax deductions, credits, and loopholes, as well as the lobbyists who defend them.
"Look, they're gonna fight tooth-and-nail on this," said Rep. Kevin Brady, the Republican chairman of the House Ways and Means Committee, speaking on CNN. "They will take all of tax reform down to just keep their one special provision."
Rep. Joe Barton, R-Texas, one of the few remaining members of Congress who voted for Reagan's 1986 tax reform, noted that votes to end tax breaks "are the kinds of issues that are going to cause anguish."
"Everybody is for lower rates, but in order to pay for it, then you have to close loopholes and eliminate deductions. Or, cut spending," Barton said. "And that is where it gets more difficult. Ultimately, each member has to decide what is the right thing to do."
One of the biggest breaks Republican leaders have singled out for elimination is the deduction for state and local taxes.
A tax break that would total around $1.3 trillion in the next decade, according to the Treasury, it allows taxpayers to deduct state and local property taxes and sales or income taxes from their federal taxes.
As a result, the break has support from Republicans in high-tax states, particularly New York, California, Connecticut, and New Jersey.
In those states, taxpayers disproportionately benefit from the deduction. California alone accounts for one-fifth of the total amount of tax breaks claimed via the deduction.
Political polarization will make it somewhat easier for Republicans to stomach eliminating the break in exchange for lower rates. There are no GOP senators in the top five states that benefit from the deduction.
Trump and Ryan, though, will have trouble getting some of the blue-state representatives to follow through with getting rid of the tax break.
Claudia Tenney, a freshman representative of central New York, tweeted that she would try to keep the break in the final tax bill. Until New York state "completely overhauls its tax code," she wrote, "removing this provision will strip primarily middle & low-income NYers of only real tax relief."
It would take an unprecedented political effort to totally repeal the state and local tax deduction. Key lawmakers have never committed to totally ending it. It's been in the tax code since 1913, and survived President Reagan's attempts to take it out. A coalition of state and local government officials and realtors, who fear that ending the break on property taxes could hurt the market, have organized to press Congress to maintain the deduction.
At least one blue-state Republican, however, said Republicans would have more success this time around.
"I'm not too concerned about it," said Rep. Devin Nunes, who represents part of California's Central Valley. The existing state and local tax deduction is "mostly a tax cut for the rich," he said.
Nunes is a senior member of the tax-writing committee whose ideas have helped shape the tax reform plan.
Nunes downplayed the problems that the California delegation will have voting to change the deduction, although he stopped short of saying that it would be repealed entirely. He said he was optimistic about the prospects for reform even though "there's going to be people who are going to scream" about the loss of breaks.
Nunes is right that the deduction is a break for the rich. Ninety percent of its benefits accrue to people making more than $100,000.
The problem that Republicans might encounter, though, is the possibility that some solidly middle class families could experience a tax hike through the loss of the deduction. For example, it's possible to imagine a married couple, one a teacher and another a fireman, making around $100,000, losing a significant break on their state and local taxes, and not getting a rate cut sufficient to make up the difference.
Cohn acknowledged at a press conference that the White House could not guarantee that no middle class families could see tax increases, noting how diverse the country is. "I cannot guarantee that. You could find me someone in the country that their taxes may not go down," he said.
If a credible analysis showed the tax bill raising taxes on some middle class families, Democrats would be sure to exploit it and make the vote much tougher.
In fact, they already are trying. "If you think this proposal is for the middle class, then you think Trump Tower is middle class housing," said Sen. Ron Wyden of Oregon, the ranking Democrat on the Senate Finance Committee.
"The biggest answer I haven't seen yet is for 90 percent of Americans, are they going to pay more or pay less?" noted Rep. Scott DesJarlais, R-Tenn. "There are still lots of questions and it's a work in progress. I want to make sure it helps people."
Speaking at an event hosted by the law firm BakerHostetler, Illinois' Rep. Peter Roskam, the chairman of the Ways and Means tax subcommittee, suggested that some compromise might have to be brokered on the provision. "This is all a matter of negotiation," he said.
As treacherous as the tax reform push is in touching individual tax breaks, the pushback will be just as strong on the business side.
To pay for cutting business tax rates and allowing immediate write-offs of equipment expenses, the plan would eliminate a whole raft of business tax breaks. Most prominently, it would curtail companies' ability to deduct the cost of interest payments from their taxable income.
The ability to deduct interest payments is a major feature of the tax code. The House Republicans' campaign tax plan called for ending it, a measure that would have raised over $1 trillion in a decade, according to the Tax Foundation.
The new GOP plan would not totally stop all businesses from deducting interest expenses. As laid out, though, it would likely be a tax reform pay-for of multiple hundreds of billions of dollars.
The housing industry, investors, and other business groups will fight to keep as much of the break as possible. They come prepared with the argument that interest payments are a normal cost of doing business, and should be subtracted from taxable income, just as purchases for inventory are.
A number of congressional Republicans are prepared to argue on their behalf.
"I'm a big believer that interest is a true deduction," said Rep. Jim Renacci, an Ohio Republican and member of the Ways and Means Committee.
Renacci noted that borrowing money was the only option for him when he started his own company, as no one would have invested in his enterprise. "I think we have to be willing to allow for that," he said.
Renacci's not alone. A number of GOP senators have expressed concerns about changing that part of the code.
Yet, that and other revenue-raisers must be part of the bill if Republicans want to follow through. "There's going to be a lot of tough decisions down the road that have to be made," Nunes said.
Chances of reform
In the House, Ryan and Brady have expressed confidence that the tax bill, when it's written, will pass the House, and claim buy-in from all the ideological spectrum.
"We are all in on this," Ryan said in a CNBC interview. "We are unified on this."
"I cannot imagine that there would be one caucus or another that would try to mount a charge to take it down at this point," said Rep. Mark Walker, the North Carolina Republican who chairs the Republican Study Committee, a large group of conservative members of the House.
The fear is that the Senate, with its margin of just two Republicans, will fail on taxes just as it has with other GOP priorities. Alternatively, the Senate could significantly compromise the reform to pass it, as happened with the Bush tax cuts.
The senators to worry about are the same ones who doomed the Obamacare repeal effort with "no" votes, said Jason Pye, vice president of legislative affairs for FreedomWorks, a free-market group.
Specifically, he said, Sens. John McCain of Arizona, Susan Collins of Maine, and Lisa Murkowski of Alaska were threats to derail the legislation.
Thus far, though, no one in the upper chamber has signaled that they will complicate the effort. McCain, in particular, issued a statement of support for the plan. Murkowski said she met with Treasury Secretary Steven Mnuchin Thursday morning to discuss the plan, and had positive reviews of the talk.
Still, without any scope for losing votes in the Senate, conservatives are concerned that one senator could trip up the legislative push by succumbing to lobbyist entreaties.
"It's up to us and up to the conservative grassroots across the country to fight back," said Pye, referencing his group's ability to mobilize volunteers to call, email, and confront lawmakers. "You can't be cutting deals with the swamp, these crocodiles."
"I'm 100 percent supportive of starting with Mitch McConnell and putting the spotlight on them when they're ineffective," said Walker, commenting on the possibility of the upper chamber blowing up the tax reform plan. "We've got to turn the heat up on the Senate."
In the Senate, tax reform advocates realize what needs to be done.
"The real question is: Do people have the courage to actually close the loopholes that are necessary to get there?" Corker said.
Corker said that he does have the courage. But he has also already announced that he won't run for reelection in 2018.