Another option is to "just let it rip," said Valliere. He said a plan that is not revenue neutral would face its own difficulties being adopted, even though Trump had supported such a plan in the past. "Let it be a revenue loser on paper. Proponents of a big tax cut say it would generate a gusher of revenues over the next few years."
The alternative of a smaller cut in the corporate tax rate may not give the economy the anticipated boost the administration is looking for since many S&P 500 companies already pay far less than the 35 percent. The average effective tax rate is about 25 percent for big companies.
"We're still going to get a tax cut. We're still going to get tax reform. I just think this complicates things even more," said Valliere. He said it could mean a longer time frame and a tax cut that would not become effective until next year. "There is the threat they have to consider a slightly smaller tax cut and that would generate real opposition from the White House."
The stock market's rally has been fueled in part by hopes that a big tax cut — of one kind or another — would bump up corporate profits and spending.
But if tax reform stalls as Congress debates how to shape it, the market could become impatient.
"You're going to get a lot of hand-wringing. It's slow, and it's going to be gradual," said Dan Clifton, head of policy research at advisory firm Strategas.
Companies have been lining up on both sides of the plan, and lobbyists have been pushing for exemptions. There has been talk that energy could be exempted, given the fact that the U.S. imports about 8 million barrels of oil every day. Energy analysts say gasoline prices would rise, but so would the price of domestic oil.
"It's like 'Hunger Games' for tax lobbyists now," said Clifton. "If you're negatively impacted by the border tax, you're pushing the net interest deductibility." Limiting interest deductibility would be a negative for financial firms.
Earlier this week, Goldman Sachs economists put the odds of a border tax adjustment at about 20 percent. Besides concerns about the effect on consumers, the European Union and other trading partners may challenge it with the World Trade Organization.
Trump raised market expectations about tax reform when he promised last week he would unveil his own plan in the next several weeks, and it's unclear whether it will resemble the House proposal.
"If that tax reform date looks like it's pushed too far in the future, the market reacts negatively to it. We don't think it kills the bull market, but it could pull the market down 3 to 4 percent near term. A trim, not a haircut," said John Stoltzfus, chief investment strategist at Oppenheimer Asset Management.
Trump has previously proposed a plan that would reduce the corporate tax rate to 15 percent. "Our expectation is the forthcoming White House plan will reduce rates largely by expanding the budget deficit, with a small amount of base broadening. By contrast, we expect that the Senate will consider legislation that broadens the tax base somewhat more, but proposes a smaller cut to the corporate tax rate to limit the budgetary effect," the Goldman economists said.
They also said without the border adjustment proposal the tax rate would probably be closer to 25 percent, not much bang for companies already at that rate based on deductions. Small companies, however, would benefit because many of them pay much closer to the 35 percent rate.
The plan is so controversial it's hard to say whether it would pass, Boockvar said. "The Senate is going to be a lot more resistant to it. I think bottom line is the market is making it seem like there are only winners from tax reform. But with the border adjusted tax, there are going to be winners and losers."
"They have to come up with a plan B or this market is going to collapse," said Boockvar.
Rep. Devin Nunes, R-Calif., said Tuesday on CNBC that in his mind, there would be no tax bill without a border adjusted tax. "I don't know any other way to do it. We've long looked at this. We've had exhaustive hearing after hearing after hearing for eight years," said Nunes, a member of the Ways and Means Committee. He said the committee has found the only way to make meaningful changes is to move to a full consumption-based system.
"This is the only way to leapfrog United States tax code in front of every other tax code around the world," said Nunes.
Rep. Kevin Brady, R-Texas, head of Ways and Means, also said on CNBC this week there would be no tax reform without it.
Clifton said the House leadership has said this before, and the House does not currently have the 218 votes for tax reform with the border adjustment tax, but Ryan and others believe they have more flexibility to get the tax rate lower with it. He said without Trump's endorsement, it's a hard sell to get other House members on board.
Clifton said a tax plan without a border tax adjustment is most likely, and he recently outlined several scenarios.
One is for a plan that includes 100 percent expensing for a few years instead of having companies depreciate capital expenditures. That could take the corporate tax rate to 23 percent, he said. Tax reform could also include a one-time repatriation of the $2 trillion in corporate cash held overseas, also currently in the House plan. The net interest deduction would also be capped under this plan and existing corporate deductions and credit would be removed.
A second option is a straight tax cut, a proposal that Trump has discussed. But without revenue generation, it could face opposition and potentially result in higher interest rates, as it could add to U.S. debt. Clifton said a straight cut could get done much quicker, and in 2003, a tax cut boosted GDP growth to 7 percent in the third quarter and 5.5 percent in the fourth quarter.
The third fallback plan he sees is a one-time repatriation of overseas cash, together with infrastructure spending. Clifton said the worrisome Oroville Dam in California is likely to renew calls for major infrastructure plans, but thinks House conservatives would probably oppose it.