I spoke to CNBC‘s John Harwood about the implications of GOP victories overnight in Georgia and South Carolina. Bottom line: Republicans will be emboldened by these wins, but can’t risk complacency.

The good news for Trump from Tuesday’s election is immediate. His party’s campaign operatives skillfully rose to the challenge of containing the brush fire of Democratic resistance and demoralized the president’s opposition.

More importantly, it calms the jitters of his own party about the consequences of aligning themselves with him. That means, notwithstanding his sub-40 percent approval rating, Trump has a slightly better chance of persuading Republican lawmakers to swallow their reservations and embrace his legislative priorities on health care, tax reform and infrastructure.

“They’ll decide the stove is not that hot,” said GOP strategist Liam Donovan.

The longer-term implication is less reassuring for Republicans. They have held all four House seats that opened up after the president selected their representatives for his Cabinet. Yet in each case — including both Georgia’s 6th District and South Carolina’s 5th on Tuesday night — Democrats ran much closer than they had in 2014.

That points toward a 2018 mid-term election climate even more favorable than opposition parties typically enjoy in the early phase of a new president’s tenure. They will have plenty of targets, and are highly likely to gain seats next November, in addition to being favored in governor’s races in New Jersey and Virginia this fall.

“The House is in play, period,” Donovan said. That was clear merely from the fact that Georgia’s 6th, a longtime GOP stronghold, was competitive in the first place.

Read the full article here.

I spoke to Gideon Resnick of the Daily Beast about the surprising result in the Virginia gubernatorial primary that perhaps shouldn’t have been so surprising in hindsight.

“In this party at this political moment, an anti-establishment firebrand pushing identity politics was bound to get some traction with a staid mainstream Republican as the foil,” Liam Donovan, a Virginia-based former GOP operative, told The Daily Beast. “Throw in a third party, a competitive Dem race, conventional wisdom of a Gillespie rout, and an increasingly ‘selective’ denominator, and you get what we saw tonight.”

Read the entire piece here.

I spoke with Bernie Becker who writes POLITICO‘s Morning Tax tipsheet about the repeal of the infamous Kansas tax cuts and whether it will have an impact on the federal tax reform debate:

Here’s one explanation that was offered for why the two are an imperfect comparison — the design of the Kansas tax cuts, which totally erased taxes on pass-throughs, was so bad that it’s hard to even contemplate anything like it passing in D.C. “I don’t know how you could possibly replicate it at the federal level,” said Liam Donovan, the director of legislative and political affairs at Associated Builders and Contractors and a former top staffer at the National Republican Senatorial Committee. “It’s so egregious — we’re talking about pass-throughs paying zero. It’s almost cartoonish.”

You can read the rest here.

While it didn’t make the story, I laid out for Bernie why the comparison is being misapplied, and how the real lesson of Kansas is being ignored, echoing my tweetstorm from a few weeks back:

It’s not that pass-throughs are bad. It’s not even that steep tax cuts are bad. [But] if you make one business structure wildly preferential, people will seek it out. And if exempt it from tax altogether, katy bar the door.

So you want to invoke Kansas to argue cuts won’t pay for themselves? Fine. But don’t use it to demonize pass-thrus when that mangles the point.

If anything, Kansas experience underscores why it’s important to have equal (or at least similar) treatment regardless of business structure. Should that mean a 15% rate for all? Maybe, maybe not. But you certainly can’t have a 20pt chasm between Main Street and the Fortune 500.

Neither the Trump plan nor the House blueprint would exempt pass-throughs a la Kansas. Nor would either advantage them over C-corps. Only in the administration’s proposal would even be on equal footing.

Bottom line: using the example of Kansas to argue against pass-through parity is at best inapt, and at worst self-defeating. Rate disparities inevitably distort behavior, and a large gap between C-corp and pass-throughs would have a similar effect, just in the other direction.