The loss of those revenues means the scope of the tax reform package will likely be smaller than the sweeping cuts Trump and the GOP campaigned on last fall. Deeper tax cuts – without corresponding deep cuts in spending – will likely draw strong opposition from GOP fiscal conservatives opposed to any increases in the budget deficit.
"It's really going to be very difficult," said James Pethokoukis, a columnist at the American Enterprise Institute. "They're trying to do big tax cuts at the same time they've made all these promises about balancing the budget. You can be the most wonderful negotiator in the world but you can't make one plus one equal three."
The White House this week signaled that it may soften its proposed tax corporate tax cuts, from the 15 percent rate proposed in April to a somewhat higher rate. The current top rate is 35 percent.
One alternative could involve a large, but temporary, tax cut that lets Republicans declare victory without imposing permanent budget gaps, much like the Bush tax cuts of 2001. When they finally expired at the end of 2012, Congress had to scramble to avoid the so-called fiscal cliff created by abrupt tax hikes and spending cuts that threatened to produce a huge drag on the economy.
"The problem with these temporary tax cuts is that they're unstable; they add to the problems of the tax system, they don't subtract from it," said Jason Furman, an economist at the Peterson Institute for International Economics. "They'll get reversed in the future and, in the meantime, they'll add to the deficit."
Though details of the White House plan are being closely guarded, the Trump administration is planning a big push after Congress returns from its August recess, according to Gary Cohn, director of the National Economic Council.
"We were going to get to tax reform if [health-care reform] passes or it doesn't pass," Cohn said late last month. "We are on a tax reform agenda when we come back in September, when the August recess is over. We will be 100 percent engaged in tax reform."
That puts the debate over tax reform on a collision course with two other politically contentious battles, one over the proposed budget for next year and the other over the debt ceiling, which the Treasury expects to hit by mid-October.
With Democrats unwilling to cross the aisle and Republicans divided between moderates and staunch conservatives, the divisions created by the health-care battle are already complicating debate over those issues.
"We've got lots of other things coming up where this basic governing problem is going to manifest itself," said Peter Orszag, former budget director in the Obama administration.