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Tax reform bill a 'big win' for now, but it could all go wrong in 2018: Former White House official

Key Points
  • House and Senate lawmakers have begun wrangling over a tax reform plan that reconciles versions from both chambers.
  • Massive overhaul of the U.S. tax system looks set to get the green light by Christmas.
  • Whether U.S. tax reform will translate into a boost for U.S. President Donald Trump over the longer term remains to be seen.
Fratto: Tax reform a once in a generation opportunity for GOP

A massive overhaul of the looks set to get the green light by Christmas. But whether it will translate into a boost for U.S. President Donald Trump over the longer term remains to be seen, according to a former White House official.

Tony Fratto, founder and partner of Hamilton Place Strategies and deputy press secretary during George W Bush's tenure at the White House, told CNBC on Tuesday that the tax reform plan was a "big win" for Trump and the Republican party.

However, he added that it was uncertain whether this would lead to a bounce in the polls for Trump, or at the midterm elections for the GOP next year.

Fratto: A lot of things can change by mid-term elections

"I think it's a big win for Congressional Republicans," Fratto said, calling it a "once in a generation opportunity."

"They have been working on tax reform and tax reform proposals and ideas for a very long time, well before Donald Trump even ran for president let alone when he became president. But it gave them the opportunity when Trump won to try to get it across the line," he said.

House and Senate lawmakers have begun wrangling over a tax reform plan that reconciles versions from both chambers. Sticking points have arisen, from a corporate tax rate to estate taxes. Still, Congressional Republicans hope to get a bill to Trump's desk by Christmas.

Fratto thought that was feasible. "There are some differences between the House and Senate versions but I'm very confident that they're going to get them worked out before Christmas and get a bill to the president's desk (by then)," he said.

"Whether this is enough to sustain the party going into the mid-term elections (in November 2018) is something we'll have to see. Is it enough to overcome those negative feelings (towards Trump in the polls)?"

Tax reform plans center on cutting corporate tax rates and some individual tax rates, as well as changes to several tax breaks. The bill assumes that tax cuts will encourage economic growth and will boost tax revenues over time. Its detractors say the richest will benefit most and .

Going sour?

While the tax reform plans have been generally welcomed by businesses, the impact on voter sentiment is uncertain, particularly given that the effects of tax cuts could take years to filter through.

The plans also come at a time when Trump's popularity continues to dwindle, with the latest Harvard CAPS/Harris poll showing his approval rating in November at 41 percent — a new low.

Asked whether Trump would get a popularity boost from the tax cuts, Fratto said that the legislation was a "win for now," but whether the president's traditional lower and middle-class supporters would react positively was yet to be seen.

"If you're doing tax reform and you're trying to pay for it, by definition you're going to have some taxes go up and some taxes go down. You're always going to have some winners and some losers. But, overwhelmingly, 80 percent-plus number of voters in all demographic groups are going to see tax cuts," he said.

"Is that enough? Is that going to be popular? We won't know until people feel the impact of it and see what macro-economic effect it has for them."

Fratto said that while tax reform gives Republicans something to campaign on ahead of midterm elections next year, a lot could happen in that time, especially with an unpredictable president like Trump.

"It's had some other positive effects in terms of business confidence and consumer confidence," he said. "But on the negative side, their president is not popular, he does controversial things every day that make voters question whether they want to continue with this (leader). And then we don't know a lot of the unknowns, like what's going to happen with foreign policy, which could be volatile, or what's going to happen in the or ."

"These are the kinds of things that if they go the wrong way, where Americans can lose even more confidence in the elected leadership, that could really sour things for the Republicans in 2018," he added.

On Monday, the Supreme Court approved Trump's ban on visas from certain Muslim-majority countries. Only two of the nine high court justices dissented to the decision. This after the lower courts had blocked two previous attempts by the Trump administration to enact the ban.

Trump supporters hailed the decision as a victory for national security, while opponents said it infringes on religious freedom and hurts economic growth.

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