By Alan Murray and Geoffrey Smith
November 10, 2017

Good morning.

I spent two years of my life following the perils-of-Pauline path of the 1986 tax reform bill (see: Showdown at Gucci Gulch), and remain skeptical that Republicans in Congress can repeat the process in six weeks. But they sure seem determined to try. Their poor showing in this week’s election, oddly, is helping their cause. They now realize—if they didn’t before—that they have to have an issue, other than Trump, to run on in next year’s elections. Tax reform is their last, best hope.

“It clearly is a do-or-die moment in my view in terms of holding the majority,” says GOP Rep. Tom Cole. “It doesn’t guarantee success, but it’s a precondition for success.”

Still, they face three big obstacles:

  1. Keeping the price tag below the $1.5 trillion that the budget resolution allows (you would think that would be sufficient!);
  2. Convincing people (or at least GOP voters) that the bill is better for the middle class (or at least the middle class in Republican states and districts) than it is for the rich, as they claim;
  3. Placating the small business lobby, which is a powerful force in Republican politics.

The Senate unveiled its version of the bill yesterday. They dealt with problem #1 by delaying the corporate tax cut until 2019 and by fully eliminating more of the state and local tax deduction, which largely hits Democratic states. They dealt with #2 by retaining a 10% bracket and retaining a tax on estates over $22 million. And they made an attempt to improve the optics on problem #3 by being more generous in their tax relief for pass-through businesses.

How the House and Senate will ultimately resolve their differences is unclear. But that only matters if both bodies can pass a bill first. The House is going to take a stab next week. The Senate is aiming for immediately after Thanksgiving. Given that Democrats aren’t playing in this game, both votes will be cliffhangers.

More news below—and enjoy the weekend.

Alan Murray
@alansmurray
alan.murray@fortune.com

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