republicans<u+2019> race to rewrite the u.s. tax code on the heels of this month<u+2019>s election relies on years of work that is suddenly<u+2014>and quite unexpectedly<u+2014>poised to pay off. a 2017 tax overhaul would be a case study in the<u+00a0>benefits of<u+00a0>dead ends and behind-the-scenes preparation. failure would show again how hard it is to reshape the u.s. tax system, even with rare political momentum and<u+00a0>one-party control of government. republicans have long sought a rate-lowering, base-broadening revamp of the tax code, fusing<u+00a0>differing<u+00a0>business interests within the gop coalition. corporations would get a rate cut and lighter taxes on foreign income. so would small businesses, who report profits on their owners<u+2019> individual tax returns. individuals would get those lower rates and simpler annual tax filing. whether the overhaul would give the economy a big lift is open to question. the conservative-leaning tax foundation says it would boost investment, after-tax income for all groups and create 1.7 million jobs in the long run. that's an optimistic view. economic models that are more sensitive to budget deficits suggest more modest results. the challenge is trade-offs, deciding which breaks get curtailed to prevent budget deficits from exploding. the landmark 1986 tax overhaul took years of planning to get past those problems. republicans are now partway through that work. <u+201c>we<u+2019>ve grappled with this stuff,<u+201d> says conservative tax activist ryan ellis. <u+201c>it<u+2019>s ripe.<u+201d> ex-rep. dave camp, a michigan republican who took over the house ways and means committee in 2011, put out a series of detailed drafts on foreign income, derivatives and partnerships over several years. when he unveiled a complete bill in 2014, political momentum had flagged, and some ideas<u+2014>a bank tax and longer depreciation schedules<u+2014>flopped inside the gop. that shipwreck ultimately proved useful. mr. camp had showed republicans what couldn<u+2019>t work, and his jetsam became ready-made chunks of legislation for his successors. <u+201c>we had to go through all that process in order to essentially prove that if you want to rearrange the deck chairs on the titanic, you<u+2019>re not going to get anything done,<u+201d> said rep. devin nunes (r., calif.), a senior ways and means member. republicans started solving the problems that sank mr. camp. they incorporated the concept of dynamic scoring into the official budgeting process, so that congress now assumes tax cuts can partly pay for themselves through economic growth. republicans didn<u+2019>t, however, replace the nonpartisan economists at the joint committee on taxation who do that work. that made dynamic scoring estimates more modest than conservatives wanted but also more credible and difficult to attack. then last year, working with president barack obama, they permanently extended temporary breaks like the research tax credit. for mr. camp, extending those provisions counted as a tax cut. now, the price is baked into assumptions<u+00a0>so that keeping<u+00a0>them costs republicans nothing; repealing them provides money to lower tax rates. house republicans then outlined their <u+201c>better way<u+201d> blueprint this year, introducing new ideas on international and business taxation. the news conference was the morning after the brexit vote in june, and ways and means chairman kevin brady (r., texas) jokes that even his family didn<u+2019>t watch. the blueprint is detailed enough to be credible and vague enough to avoid provoking much opposition, so it allowed republicans to start writing a bill and talk to businesses while the presidential campaign raged. as donald trump revised his tax plan, he latched onto parts of the blueprint. when mr. trump won the election, mr. brady and house speaker paul ryan (r., wis.,) quickly put the tax blueprint near the top of the 2017 agenda. plenty of obstacles remain. <u+201c>almost everything has to go right and a million things can go wrong,<u+201d> said john gimigliano of kpmg llp. republicans must work through fights between industries and among their own members. they will have to defend giving the bulk of the breaks to the top 1% of households. messrs. ryan and brady say they<u+2019>re focused on economic growth, not the distribution along the income scale, but the benefits at the top may give some populist lawmakers pause. <u+201c>they<u+2019>re going to have to grapple with the fact that trump and trumpism is not associated with the actual policies they<u+2019>re going to try to enact,<u+201d> said david kamin, a new york university law professor and former obama aide. they also need to decide how big a tax cut they want. mr. trump<u+2019>s plan exceeds $4 trillion over a decade and doesn<u+2019>t pay for itself, even under optimistic assumptions. mr. brady is aiming the smaller house plan to be deficit-neutral under dynamic scoring. unless they want democratic partners<u+2014>which could require scrapping individual rate cuts<u+2014>republicans will use quirky budget rules that could limit the tax cuts or force a 10-year expiration date. that<u+2019>s all tough work. but good timing is in their favor, said rep. vern buchanan (r., fla.). <u+201c>we have a rare and golden moment,<u+201d> he said. write to richard rubin at richard.rubin@wsj.com
after years of turmoil, republican tax overhaul picks up speed - wsj
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