Republican hopes for rewriting tax code in 2017 are fading

Only two months ago, Republicans in Congress and President Trump’s top economic advisers were confidently predicting that a sweeping rewrite of the tax code would be in hand by summer’s end.

But with the White House consumed with constant upheaval, Congress facing the prospect of myriad investigations on top of its delayed duty to fund the government, and health care legislation still grinding through the Senate, those hopes have faded. Even with the less ambitious plan of just tax cuts — not a tax overhaul — the new mantra in Washington is “Maybe next year.”

“I think people are beginning to settle in and come to the realization that this is going to be a long ride,” said Ken Spain, a former National Republican Congressional Committee spokesman who lobbies for businesses on tax issues. “The hope was to get something done by the end of 2017, but this could slip to 2018.”

Members of Congress have quietly started to modulate their ambitions. Senator Mitch McConnell, Republican of Kentucky and the majority leader, said on Tuesday that passing tax cuts “this Congress” was more likely than revamping the tax code this year. Representative Kevin Brady, Republican of Texas and the chairman of the Ways and Means Committee, who still hopes to get something passed in 2017, has stopped publicly setting monthly goals.

The realization is a gloomy one for Republicans who have spent years waiting for the planets to finally align and make a tax overhaul possible. Differences between the White House, the Senate and the House of Representatives over what shape a tax plan should take have stalled the crafting of legislation.

Despite the disappointing fits and starts, they are trying to get things on track this week.

On Wednesday, Treasury Secretary Steven Mnuchin and Gary D. Cohn, director of the National Economic Council, head to the Capitol for a briefing with Republicans and Democrats of the Senate Finance Committee on where the tax overhaul stands. It will be a rare moment of bipartisan outreach for an administration that has said it expects any tax legislation to be a Republican-only affair.

The House, which released its own blueprint almost a year ago, will take an important step forward on Thursday when the Ways and Means Committee holds its first public hearing on taxes. Republicans will call business executives to testify about why the existing system needs to be changed to spur economic growth, while Democrats will invite Steven Rattner, the investor and former Obama administration official, to discuss the importance of focusing tax cuts on the middle class.

The hearing will be an appetizer for a session on Tuesday that will focus on the contentious border adjustment tax that Speaker Paul D. Ryan and Mr. Brady have been pitching across the country. Opponents of the proposal, which would impose a 20 percent tax on imports, have been swarming the capital this week to stop it in its tracks.

Mr. Brady and Mr. Ryan both insisted this week that some form of border adjustment tax remained crucial to a tax overhaul, while Mr. McConnell said it would not have sufficient support to pass in the Senate. The White House has not backed it.

As he left the meeting with Mr. Mnuchin and Mr. Cohn, Senator Ron Wyden of Oregon, the ranking Democrat on the Senate Finance Committee, said the White House was still struggling to add substance to the one-page outline it released last month.

“To date, they have not given us very much — one page — I’ve had drugstore receipts that were longer,” Mr. Wyden said. “The clock is really ticking down, and they need to get us some specifics soon.”

Despite the flurry of activity, the prospects of quick action on taxes are dim because Congress has so many other things to deal with. Mr. Trump is expected to release a budget next week. That will set off a new debate about cuts to domestic programs and increases in military and border security spending for 2018. Congress faces an October deadline to pass a funding bill for next year. Otherwise, parts of the government will shut down.

Republicans in Congress must separately approve a budget resolution this summer if they want to use the reconciliation process to pass a tax overhaul with a simple majority in the Senate. That will determine the scope of the tax legislation that Republicans can pursue if they choose to exclude Democrats from the process. Health care legislation that is being put together in the Senate could lead to additional delays.

And to top things off, Republicans and Democrats must reach a deal this fall over raising the debt ceiling.

“I’m not optimistic that we can have actual legislation on the president’s desk in calendar year 2017,” said G. William Hoagland, vice president of the Bipartisan Policy Center and a former director of the Senate Budget Committee. “There are a lot of other things on their plate, and they don’t have that many days left.”

Analysts on Wall Street are also tempering their optimism. Goldman Sachs economists wrote in a note to clients last week that the prospect of tax cuts was looking less rosy than a few weeks ago and that passage of any legislation in 2017 was “unlikely.”

Rohit Kumar, a tax expert at PwC who used to advise Mr. McConnell, said he hoped the behind-the-scenes negotiations that have so far slowed progress on tax legislation would help speed its eventual enactment once everyone gets on the same page.

However, he acknowledged that the continuing swirl of questions about Mr. Trump’s dealings with Russia and the furor over his firing of the F.B.I. director, James B. Comey, could have implications that are hard to foresee.

“I don’t have a good sense for how much more drama the system can tolerate before it detracts form the ability to advance the legislative agenda,” Mr. Kumar said. “There is some theoretical limit for the system.”

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