Trump shifts course again, says health care repeal must precede tax overhaul

The reversal comes just weeks after Trump said he was abandoning the health-care repeal effort following a nasty split between Republicans on how to proceed. He wanted to pivot immediately to an overhaul of the tax code, but lawmakers and advisers have convinced him that another effort is needed to repeal the health-care law, which was one of his top campaign promises.

Trump explained his new strategy during a Wednesday interview with Fox Business, though he left open the possibility that he would shift gears again.

“Health care is going to happen at some point,” Trump said. “Now, if it doesn’t happen fast enough, I’ll start the taxes. But the tax reform and the tax cuts are better if I can do health care first.”

The new approach reflects a harsh political reality: Congressional budget rules make it much easier to pass a broad overhaul of the tax code once the roughly $1 trillion in taxes that are in the Affordable Care Act have already been repealed. So if the health-care law is repealed and replaced, the tax overhaul becomes politically easier.

Because overhauling the tax code is so popular among Republicans, he could lure them into compromising on the health-care package to pave the way for a vote on tax cuts before the 2018 midterm elections.

“I think he senses maybe there’s a little bit of a change as people think through the consequences,” said Rep. Tom Cole, R-Okla., who is close to House GOP leaders. “It’s too early in the process to kill this, and it will impact the rest of our agenda. I think other members of different points of view are beginning to figure that out.”

GOP aides familiar with the health-care negotiations, however, said Trump’s remarks did not reflect hopes of an imminent breakthrough.

White House officials – including Vice President Pence and budget director Mick Mulvaney – remain involved in brokering a deal, speaking on several occasions earlier this week with Rep. Mark Meadows, R-N.C., the chairman of the hard-right House Freedom Caucus. The Trump administration’s efforts over the past two weeks have been focused on persuading Freedom Caucus members to support the bill without driving away other House Republicans.

On a Monday conference call, members of the caucus discussed a pair of tweaks to the bill that they concluded could possibly win their support: One would slightly modify a previous proposal to allow states to apply for waivers from Affordable Care Act insurance mandates, making clear that insurers could not price their products based on a person’s health but could use other factors not currently allowed under the ACA. Another would allow ACA-compliant plans to be sold alongside plans subject to the less rigorous mandates.

But the aides said it remained unclear whether either proposal would shift the fundamental intraparty conflict: Hard-line conservatives are eager to reverse as many ACA provisions as possible, while others are concerned about potentially undoing protections for people with preexisting medical conditions.

Trump and many GOP lawmakers have repeatedly pledged to protect those with preexisting conditions, and even a partial move toward undoing relevant ACA provisions could have major political consequences.

One aide suggested that the closer-than-expected results of a House special election in Kansas on Tuesday could make it harder for moderate members to accede to Freedom Caucus demands. A Democratic win in a Georgia special election next week — to fill the seat vacated by Health and Human Services Secretary Tom Price — could potentially be a fatal setback.

But Cole said the best defense against an electoral backlash would be passing major pieces of legislation such as the health-care bill and a tax overhaul.

“I think that realization is spreading out there: that nobody is going to be safe politically,” he said. “The best thing is to get something done, because the Democratic base is fired up, and it’s going to remain fired up. The only way we can have comparable intensity on our side in an off-year election is actually deliver and do some things.”

Before leaving Washington last week, House leaders suggested lawmakers could be called back to Washington if a deal was struck. But the aides said that was highly unlikely, and House Speaker Paul Ryan, R-Wis., announced Wednesday he would be leading a congressional delegation to Europe over several days next week — a signal that any action would come after Congress returns to session.

“Member discussions continue, but we have no schedule updates to report at this time,” said Ryan spokeswoman AshLee Strong.

Trump had three major economic priorities that he wanted to push through Congress this year, and all are off to rocky starts. He promised to repeal the health-care law, overhaul the tax code and then assemble a $1 trillion infrastructure package paid for with taxes and private funding. Republicans are split on each of these measures, though, and Trump has repeatedly changed the approach for each.

Michael Steel, a former senior House Republican aide, said Trump’s renewed emphasis on health care reflected “the sense that you ought to accomplish the first thing on the list before moving to the second thing on the list — it doesn’t have to be done that way, but it’s clearly preferable.”

On taxes, congressional leaders have said they want to overhaul the tax code to cut corporate and individual tax rates while also eliminating deductions in a way that doesn’t lead to an overall loss of revenue. White House officials have suggested they don’t think this approach is necessary, saying in recent days that a sharp cut in tax rates wouldn’t necessarily need to be offset by the elimination of deductions.

And on infrastructure, the White House is still designing how to pay for the $1 trillion package while also determining whether to package the effort with something else. On Wednesday, D.J. Gribbin, who is coordinating the White House’s infrastructure plans, said administration officials were still working out details and that much was in flux.

Pushing back the overhaul of the tax code also illustrates how much work the White House has to do on this complicated effort. Trump and top aides crafted a tax overhaul package during the campaign, but it is being rewritten now, and many details are unclear.

Trump further muddied matters during his interview with Fox Business, when he said he was circumspect about a key feature of the House GOP tax plan. House Republican leaders have proposed creating a “border adjustment tax” that would essentially impose a new tax on imports and create incentives for U.S. companies to export their goods.

White House officials have been all over the place on the border adjustment tax, sometimes appearing to back it and other times suggesting it won’t work. Retailers and other businesses have tried hard to kill the idea of a border adjustment tax, arguing it will drive up their costs.

“I haven’t really wanted to talk about it,” Trump said Wednesday. “I have my own feelings. I don’t like the word adjustment, because our country gets taken advantage of, to use a nice term, by every other country in the world.”

Instead, Trump said he wanted something that he called an “import tax” or a “reciprocal tax” or a “mirror tax” or a “matching tax.”

“When you say reciprocal tax, nobody can get angry,” he said. “Even the other countries, if, like – if they’re charging you a 50 percent tax, you say, ‘OK, whatever you charge, we’re charging.’ “

But Trump offered a big caveat: “I’m not saying that’s what I’m doing.”