The Republican plan to pass tax legislation by Christmas was considered laughable
The GOP overhaul of the US tax system is slated to be signed by Trump this week
Get the members off of Capitol Hill.
That was the pitch from John Leganski, House Majority Leader Kevin McCarthy’s 26-year-old floor director, to the more than two dozen Republican leadership staffers assembled around the long rectangular conference table at the back of Speaker Paul Ryan’s office.
It was less than two weeks until the rollout of the Republican tax framework, and anxiety about a redux of the failed health care effort was palpable across GOP offices on the Hill. At its core was a question that would become central to the tax bill’s success: How do we do the exact opposite of everything we did on health care?
That’s where Leganski’s idea took hold, several aides inside the meeting told CNN. When it came to the introduction of the Republican tax framework, Leganski reasoned, keep the members away from the press to limit their ability to attack the proposal right out of the gate. Perhaps more importantly, lock them into a conference room until everyone has had every question addressed – and every major concern mollified.
“You never get a second chance to make that first impression,” one GOP aide said. “And our first impression on health care was Republicans nuking their own bill the day it came out.”
The day the House GOP repeal-and-replace effort was unveiled, it was a matter of minutes before the circular firing squad unloaded.
For taxes, Republican staffers quickly moved to set up an unofficial retreat – they kicked around Annapolis or Baltimore, before eventually settling on the National Defense University, a campus in Southwest Washington on the grounds of Fort McNair – where members of Congress always have access to facilities.
The retreat would go off without a hitch 11 days later. And by the time it was over, even the conservative House Freedom Caucus was ready to endorse the proposal. If the first impression mattered, this was a rousing success – one that laid the groundwork for the passage of the landmark legislation just short of three months later.
The story of how Republicans achieved something that just three months ago seemed as laughable as it was impossible – a sweeping overhaul of the US tax code before Christmas – is one defined by unexpected speed, tens of millions of dollars in outside spending and a series of lobbying and House-Senate parochial skirmishes.
“Did you believe we’d ever be at this day, with this bill, on this floor, with the outcome that we know is going to happen?” McCarthy asked reporters before the House vote Tuesday; Ryan quipped, “Let’s see a show of hands.”
By Wednesday afternoon, the Republican tax bill had cleared Congress – a half-day later than expected due to procedural snags in the Senate, but no less of a major legislative accomplishment, which the White House plans on celebrating with a ceremony shortly after the House passed it for a second, and final, time just before 1 p.m. ET.
Alfredo Ortiz, the president and CEO of the Job Creators Network said candidly, “many thought that this would be something that would be taken care of in the spring of next year,” even as he had advocated to do it by Christmas.
But most of all, the passage of the bill is rooted as much in the GOP’s health care failure as it is in devotion to a particular policy agenda. This recounting comes from interviews with more than two dozen lawmakers, senior aides, administration officials and lobbyists deeply involved in the process.
It’s a plan that leans heavily on dramatic changes for businesses, first among them a sharp 14 percentage point cut to the corporate rate. On the individual side, the benefits are less robust, but shown to provide a tax cut, on average, for every income class in the near term. The standard deduction is doubled, as is the child tax credit. In the plan’s first year, 80% of households would get a tax cut, according to the Joint Committee on Taxation. But the plan has been pilloried by Democrats and panned in public opinion polls for its perceived shortcomings – the individual cuts expire after eight years.
“Let me be clear, this tax bill will be an anchor around the ankles of every Republican,” Sen. Chuck Schumer, the Democratic leader in the chamber, told reporters Tuesday. “If they haven’t learned it yet, they’re going to learn it next November. Republicans will rue the day they pass this bill and the American people will never let them forget it.”
The percentage of total cuts lean toward the wealthy. Even accounting for growth, it potentially adds $1 trillion to the deficit. And the corporate overhaul underscores a key split in economic ideology of the two parties: The permanent benefits are designed to bolster economic growth, and along with it, wages. It’s a result that relies heavily on outside economic factors simply out of Republican control.
Yet Republicans – spurred by legislative failure and electoral uncertainty, united behind a central belief in the efficacy of tax cuts and bolstered by a White House that, unlike with its health care push, served as a unifying, as opposed to divisive, force – pushed through the $1.5 trillion proposal.
“I was worried about tax reform. I was very worried that we’d come back and do the same thing we did on health care,” said Sen. John Kennedy, a Republican from Louisiana. “But it didn’t happen, and about 25% of the way through, I said, ‘Ya know, we’re going to put this one together. I can tell.’ It just felt completely different.”
The biggest hurdle
Across the Capitol, Republicans were also licking their wounds from the stinging health care defeat – one in which the blame fell squarely at the feet of the 52 members of the GOP Senate. Fierce outside opposition – and a unified Democratic caucus – succeeded in splitting the party on health care. Democrats would once again be on the sidelines in both the House and Senate as Republicans pursued a partisan process always designed to allow passage by a simple majority vote in the chamber. They would need to fend off another concerted effort to sink the legislation by a unified Democratic caucus deeply opposed to the bill.
But aides involved in the process recognized something immediately upon their return from the August recess, having been hammered by their constituents during their weeks at home: They had returned desperate to do something – anything.
One Republican lobbyist recounted going to several fundraisers and asking members who was getting the blame for the health care failure back home.
Contrary to the prevailing wisdom inside the Beltway that President Donald Trump had fumbled on health care with his lack of policy acumen and inconsistent positions, this lobbyist said: “Donald Trump was not being blamed for being bad at his job. They were.”
Members were also hearing from donors.
“Oh mercy, yes,” Sen. Roger Wicker, R-Mississippi, said when asked whether he had heard from angry voters and donors back home. “Donors want to think they are contributing to a winning campaign strategy and secondly that policy changes are going to result.”
It was a combination that sparked action that for 31 years, despite the efforts of both parties, had been blunted by an array of sacred cows and outside interests that for many, seemed likely to win the day this time around as well. It turned out the threat of doing nothing – and the unprecedented speed of the process – prevailed.
“Before anyone could get too organized, the process was too far along,” one lobbyist acknowledged.
Yet the Senate had long been viewed as the biggest hurdle to the overhaul – a chamber with members that held disparate interests and constituencies to go along with their high regard for themselves and their own power. It’s not a new dynamic – but it is one that aides acknowledge historically creates difficulties.
“There is some ego. It’s not secret in the Senate there are a couple of jerks and there are a few people who think they are the founding fathers,” Kennedy said of his colleagues.
It was with that in mind that McConnell and Senate Finance Committee Chairman Orrin Hatch crafted a strategy to put the onus on the members to get the bill across the finish line. Hatch deputized four colleagues on the committee right after the election, from across the range of the conference – Sen. Pat Toomey to marshal conservative support, Sen. Rob Portman for his bona fides with the more moderate members, Sen. Tim Scott for his relationship with the freshman class, and Sen. John Thune, a member of leadership.
The four would play a crucial negotiating role – and serve as de facto point men for Hatch and his team, led by staff director Jay Khosla, as they attempted to navigate the different asks and concerns raised by members in the weeks that followed.
But it went further than that – as September moved along daily staff meetings and twice-a-week member meetings turned into specific assignments for the senior staffers of each Finance Committee member. Each would take ownership of a specific piece of the tax proposal – then present to the entire group.
It was night and day from health care, aides recounted, noting that that process was largely sequestered inside a small group of senators and smaller group of staffers – leaving senators without buy-in, or in some cases, the policy know-how to handle the rapid fire opposition that followed that bill’s release. In health care – where a working group had been appointed – there had been circular discussions that went on without any resolution and no one at the end of the day to make the call.
The week before the committee was scheduled to take up the tax bill, Hatch and McConnell expanded the group – bringing in rank-and-file Republican senators in groups of six or eight for presentations with Hatch, Sen. John Cornyn, the second-ranking Republican, and staff.
Just before the final markup, McConnell came to a meeting of Hatch and committee members and stressed the need for unity – without explicitly saying they should stick together and punt away any Democratic amendments that could endanger the bill; the message was clear and it worked.
While Trump may not have been receiving the lion’s share of the blame back home in the states and districts of various Republican members, on Capitol Hill there was no shortage of pointed – if generally anonymous – criticism directed his way for his health care efforts.
To diminish Trump’s role, particularly in its marked departure from health care, where he at one point called the House bill “mean” and continued to claim it contained provisions that it simply did not, would be to shortchange efforts that, unorthodox as they may have been in a traditional sense, were enough to help the bill across the finish line.
A primary reason? According to several people involved in the process, it’s that he was significantly more conversant on taxes than he ever appeared to be on health care.
That was put on display one night in late September, just a day before the final framework was set for release. Trump hosted dinner with a handful of leading conservative activists and voices. It came just a few days after he declared war on the NFL for its players kneeling for the national anthem.
As the participants were served their beef Wellington, Trump ticked through the NFL fight and his pleasure with the response. But then, according to two attendees, he pivoted to a concise topline summary of the various pieces of the tax bill.
“The thought we all had was: ‘Huh, this is different than health care,’” one participant said. By the time their apple pie and cinnamon ice cream was served for dessert, several were convinced that the leadership from the very top could be an asset in the process.
Trump’s efforts weren’t overwhelming, but they were targeted – he was cited by several Senate aides as particularly helpful in persuading Sen. Ron Johnson, who was both frustrated and at one point opposed to the Senate bill due to its treatment of pass-through entities. (Johnson’s role was one that frustrated not just staff, but members: “Here we go” Sen. John McCain joked audibly, to chuckles from other senators, when Johnson started to pull out papers to talk about the tax bill shortly before the conference committee kicked off, according to two sources with direct knowledge of the closed-door meeting. But aides did note one thing, if grudgingly: Despite that frustration, Johnson did get what he wanted into the final bill.)
When McConnell or Ryan needed Trump to weigh in, it wasn’t long before he was on the phone with a lawmaker, aides recounted.
Trump was also cited as helping bring Sen. Rand Paul, a frequent golfing partner and the junior senator from Kentucky, on board.
Trump’s relationship with the rabble-rousing House Freedom Caucus also moved the process along.
During an interview in his office Tuesday, House Freedom Caucus Chairman Mark Meadows pointed to a signed and framed letter he has hanging on his office wall from Trump as an early indicator of just how different tax reform was going to be for the conservative group than health care was. Meadows and Ohio Rep. Jim Jordan had sent the memo to Trump before the budget vote with a list of six principles they wanted out of tax reform. The principles had been a few things Meadows had discussed at lunch with Larry Kudlow and Stephen Moore.
“We got on the same sheet of music with the administration,” Meadows recalled. “All of those things weren’t agreed to, but it provided a framework for us to have a bill that could be passed.”
Trump sent the letter back with a note on how they were going to get it done and his signature. Meadows framed it.
That’s not to say Trump’s efforts were viewed as seamless on Capitol Hill.
On multiple occasions, aides described Trump traveling for a weekend, either to New York or Mar-a-Lago, and when he returned, there would be new requests from the White House to bring down the top individual tax rate.
Several aides described frustration with the President’s use – or lack thereof – of the bully pulpit as poll numbers on the bill continued to dip into the low 30s and high 20s.
“Can you imagine how the Obama or Bush administration would’ve been on this bill? Relentless,” one senior GOP aide said. “Every day. Every media platform. Every opportunity. You guys would’ve gotten so annoyed with the repetition that you would’ve been begging us to pass it just so it would all stop.”
And the Trump administration? “Yeah, so the deep state stuff hasn’t exactly been that, has it?”
Still, Trump’s White House took a different approach this time around. Cohn was particularly cognizant of the member dynamics in the Senate, and Shahira Knight, Trump’s special assistant on tax policy, was lauded by several participants on both sides for her role.
Meanwhile, those close to the process noted that Trump’s early use of Treasury Secretary Steve Mnuchin hadn’t been entirely smooth.
“Gary Cohn’s engagement was actually better received by members in both chambers than perhaps Secretary Mnuchin,” one member said.
One area where Mnuchin got clear credit: his insistence on the aggressive post-August recess timeline. One that, in the end, despite doubts around the Capitol, proved right.
The unruly chamber
For Speaker Ryan, a full-scale overhaul of the tax code was a culmination of sorts of a life’s work. A congressional aide and think tank policy staffer, turned 20-something congressman who rose to the top of the tax writing House Ways and Means Committee, Ryan long envisioned he would be drafting the final bill.
The resignation of House Speaker John Boehner in 2015 changed that trajectory – Ryan would end up not just atop a committee, but the whole House – but the goal remained, with a new point person at its helm: Rep. Kevin Brady.
The two formed somewhat of an inside-outside tandem; Brady and his staff working on the nuts-and-bolts policy as Ryan worked both the rank-and-file members of the conference and the outside interests that would be crucial to an eventual victory.
“Kevin Brady on not just the policy side, but his demeanor through this process, stands out to me,” said Rep. Mark Walker, the chairman of the conservative Republican Study Committee. “Dare I say it was presidential and something that, from the White House to the outhouse, we could all maybe do better maybe if we followed his lead.”
There were off-the-record calls to powerful conservative media hosts like Sean Hannity and Rush Limbaugh, outreach to business groups like the National Federation of Independent Business and the National Association of Realtors. Each call, sources recounted, was designed to sell, coax, soothe or undercut any hint of opposition.
One conservative activist familiar with the process said “as the wheels were falling off the Obamacare repeal effort or right after, we started working much more closely with leadership for the first time in a long time. We had conversations with the speaker’s office, we met with Ways and Means staff and we continued that relationship right up to the end and it was nice.”
The source described one meeting in Ryan’s office the night before the House unveiled its bill as a highlight of the process. After years of sparring with Boehner and even Ryan at points, it was a rare moment of agreement. The meeting included about a dozen folks and Ryan and his key staff.
“We got to pepper him with questions, and he answered them to the best of his ability,” the conservative activist remembered. At the end of the day, it wasn’t as much a détente as it was the mere fact that tax reform was finally a shared goal.
“I wouldn’t try too hard to find some magical reason that all of this happened; it comes down to, this is a much easier issue for Republican to unite behind,” the conservative said.
And it was Ryan who, just days before the final unified tax framework was released, was on the phone with Trump talking him down as he, according to several sources involved, threatened to sink the entire process over frustration that the corporate rate wouldn’t be set at 15%, underscoring a relationship that evolved to a point of closeness that once seemed unimaginable. At various points in the process, Ryan and Trump were speaking by phone as many as two or three times a day, aides said.
Brady and Ryan didn’t align on everything – Brady preferred more money to be plowed into expensing, Ryan more for lower rates, for example – and there was constant talk of whether one was undercutting the other (and if Ryan was the one actually running the whole show). But aides in both camps pushed back on the idea; each had a specific lane and their own member relationships that helped bolster the process throughout.
Unlike health care, where members recounted in private meetings to Brady and Republican leadership that they’d felt hung out to dry by the process, this time the two would take pains – from the conference retreat through the whole process – to establish buy-in early, and not just in their chamber, but in the Senate and in a White House that for the initial months of the Trump administration never appeared to have a single point of contact to establish what its position on any particular issue actually was.
More importantly, both were largely in agreement on the policy, which was based on a House blueprint crafted the year prior.
Yet early on in the tax overhaul process, both were wedded to a policy that, despite broad alignment on the overall plans, fractured Republicans and the outside groups queued up to support them. Border adjustment – the linchpin of the House GOP plan – would have imposed a levy on imports, and exempt exports altogether. But it was a flashpoint for many members, with opposition by monied outside industries like retailers, car dealers and perhaps most importantly, Koch Industries Inc., and the outside group aligned with billionaire brothers Charles and David Koch – Americans for Prosperity.
The plan lingered for months. The White House was loath to support it, even as Ryan and his team repeatedly made their case that it was the best, and at that point, only option to create more than $1 trillion in revenue to pay for the bill. It’s demise – GOP leaders announced its death by omitting it from a joint statement at the end of July – helped spark the progress that was to come.
The joint statement officially killing the border adjustment tax marked one of the first major public statements of what became known as the “Big Six” – a name the participants didn’t like, but the shorthand that stuck for the group that included Ryan, McConnell, Brady, Hatch, Mnuchin and Cohn, the director of Trump’s National Economic Council.
It was a group of big personalities and differing strategies – Mnuchin was described as wanting to dig into the weeds as much as possible, much to the chagrin of other principals who expected to be deployed only on the major decisions, and perhaps more importantly, wanted the details to be left not to a top-down group, but to the respective conferences.
McConnell pushed for releasing as little agreed-upon detail as possible – better to leave opposition and industries with limited detail to shoot at, he reasoned to other participants, according to sources involved. Ryan and Brady pushed for a middle ground of sorts – framework that would serve to peg the future legislative process to specific goals and metrics. That would win the day.
The sales job ahead
In the weeks that followed, the speed with which the process moved stunned even the most seasoned aides and outside advocates. Several aides pointed to the aggressive timeline and made one thing clear: There was no margin for error. Each week had been mapped out with check points. Should Republicans miss a single one, the bill would slip into the unknown of an election year. And yet, “once it was to the actual legislation, they did not have a single hiccup,” said Tim Phillips, the president of Americans for Prosperity.
Republicans had plenty of help on that front. American Action Network spent more than $24 million on its campaign to advocate for the bill, targeting 64 different districts with 25 unique ad campaigns on television, digital, radio and mobile billboards. They served as a clearinghouse of sorts for several key outside conservative groups, lawmakers, key staffers and administration officials with regular meetings at their offices. The largest outside business advocacy groups – including the US Chamber of Commerce and the Business Roundtable – launched sustained campaigns to keep lawmakers on track.
The Job Creators Network, an outside group founded and funded by billionaire Home Depot co-founder Bernie Marcus, lined up with former House Speaker Newt Gingrich to consult on messaging strategy – focus on “tax cuts,” Gingrich told the president/CEO of the group, not “tax reform.” More importantly, Ortiz said, the focus from all the groups, his included, centered on a single principle: Don’t sink the bill over one or two disliked provisions.
“We knew these bills weren’t perfect,” Ortiz told CNN. “But we knew they were good.”
Yet the legislative success has yet to translate into any semblance of public support. Outside groups, like Phillips’, spent much of the process on making sure the members themselves were aware of the stakes – AFP held more than 80 town halls in states and districts of GOP lawmakers to rally the grassroots support behind the effort and launched digital ad campaigns on conservative websites.
“You’re not trying to move public opinion,” Phillips said. “What you’re trying to do is build support from within to motivate.”
However effective the outside strategy, one thing was clear – the Democratic efforts to peel off potentially wavering Republican senators, and the repeated attacks on the bill’s corporate focus or perceived failings on its directed cuts for the middle class, fell short. Even still the lessons from the past kept Republicans on edge. George Callas, Ryan’s senior tax counsel and a crucial player in the effort, had taken to sending around the video of Dallas Cowboys defensive lineman Leon Lett fumbling right before the goal line in the 1993 Super Bowl as warning not to celebrate too early.
But the Republican Party was unified behind tax cuts. That strategy will now have to shift, top Republicans acknowledge, into a full sales effort – one GOP leaders say will be bolstered by near-term effects of the bill that will be hitting paychecks as soon as February.
“We’re just beginning to make the argument to the American people,” McConnell told reporters Tuesday.
As for Ryan, he would have his moment gaveling down a victorious vote on a tax overhaul, twice, it turned out, after procedural snags forced technical changes the Senate bill Tuesday night. And he remained steadfast about what the policy he’d been advocating for over decades would do in the end.
“This is a promise this majority made,” Ryan said Tuesday. “This is a promise this majority is keeping.”