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Failure on health bill also hurts prospects for tax overhaul

STEPHEN OHLEMACHER | 4/3/2017, 12:40 p.m.
House Republicans’ failure to repeal Barack Obama’s health care law deals a serious blow to another big part of President ...
Copies of President Donald Trump's first budget are displayed at the Government Printing Office in Washington, March, 16. He unveiled a $1.15 trillion budget, a far-reaching overhaul of federal government spending that slashes many domestic programs to finance a significant increase in the military and make a down payment on a U.S.-Mexico border wall. J. Scott Applewhite

House Republicans have released a blueprint that outlines their goals for a tax overhaul. It would lower the top individual income tax rate from 39.6 percent to 33 percent, and reduce the number of tax brackets from seven to three.

The House plan retains the mortgage interest deduction but repeals the deduction for state and local taxes.

On the corporate side, the plan would repeal the 35 percent corporate income tax and replace it with a 20 percent tax on profits from selling imports and domestically produced goods and services consumed in the United States.

Exports would be exempt from the new tax, called a border adjustment tax.

The new tax has drawn opposition from Republicans in the Senate. Mnuchin would not reveal whether the administration would include the border adjustment tax in the White House proposal. He was speaking at a public interview event with the news site Axios.

Republicans often complained that they couldn’t do a tax overhaul when Obama was president. Now, Republicans control the House, the Senate and the White House, and they see a great opportunity.

They plan to use a complicated Senate rule that would prevent Democrats from blocking the bill. But there’s a catch: Under the rule, the package cannot add to long-term budget deficits.

That means every tax cut has to be offset by a similar tax increase or a spending cut. That’s why the loss on health care was so damaging to the effort to overhaul taxes.

Ryan made this case to fellow House Republicans in his failed effort to gain support for the health plan.

“That was part of the calculation of why we had to take care of health care first,” said Rep. Tom Reed, R-N.Y.

Associated Press writers Kevin Freking and Martin Crutsinger contributed to this report.