The Mueller investigation is making the Republican tax plan rollout a 'sideshow' -- but that might not be a bad thing for Republicans

  • White House and congressional Republicans went into the week hoping to focus on the rollout of their plan to overhaul the tax code.
  • New developments in the investigation led by special counsel Robert Mueller is now likely to draw most of the media’s attention this week.
  • Analysts say the focus on the investigation could actually end up benefitting the tax plan.

For weeks, congressional Republicans and President Donald Trump have geared up to release a plan to overhaul the US tax code, a centrepiece of the Republican agenda for the rest of 2017 that is set for release on Wednesday.

But on Monday, Washington’s attention swung to charges filed against former Trump campaign chair Paul Manafort and campaign adviser Rick Gates, as part of special counsel Robert Mueller’s investigation into Russia’s election interference. And according to analysts, that could be a blessing in disguise for the GOP’s tax push.

“It will immediately become a target, with opposition to changes in the state and local tax, 401(k) plans, the deductibility of mortgage interest and dozens of other provisions,” said Greg Valliere, the chief strategist at Horizon Investments. “And Democrats will howl that the bill favours the wealthy. So Chairman Kevin Brady wants this to move quickly through the House, and if Mueller is the dominant story, Brady’s tax steamroller could get lost in the noise.”

“I think these arrests will have little-to-no impact on the tax package rollout, so long as the president doesn’t comment,” said Isaac Boltansky, an analyst at the research firm Compass Point. “If the president comments, the tone and tenor of the week could shift.”

Trump already noted the coincidence on Twitter, suggesting without evidence that the timing was intentional.

“All of this ‘Russia’ talk right when the Republicans are making their big push for historic Tax Cuts & Reform,” Trump said on Sunday. “Is this coincidental? NOT!”

Chris Krueger, an analyst at Cowen Washington Research Group, said the charges are a “bigly distraction” from the tax plan’s rollout. But whether that’s a good or a bad thing for Republican leadership depends on Trump’s Twitter.

“What is Trump’s reaction to the distraction? Can Trump stay on-message?” Krueger wrote following Mueller’s announcement. “Time will tell, though the track record is not fantastic as Trump frequently takes to the Twitter to fight fires with gasoline.”

Valliere agreed that the president’s reaction — whether he sticks to tax reform or lashes out — is the key over the next few days.

“Not since Richard Nixon has there been such a furious president who genuinely believes he’s the subject of a witch hunt (and has a solid core of supporters),” Valliere wrote in a note to clients Monday. “Trump could take unpredictability to a new level. Indictments will take center stage in this circus, and everything else — unveiling a tax bill, naming a new Fed Chairman, and Asia — will be sideshows.”

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