Although several hiccups have occurred, analysts at Goldman, Sachs & Co. argue there is an 80% chance tax reform is completed by early 2018.
In recent weeks, pushback from impacted industries, coupled with a string of elections in the Senate captured by Democrats, and the package's overall estimated cost, have presented headwinds to achieving tax reform in the near future.
But, Goldman contends recent developments have put its likelihood of occurring back on track.
"First, official cost estimates for the House and Senate bills suggest that key provisions would cost less than previously expected, including a 20% corporate income tax," Goldman noted. "Second, political opposition to substantial limits on state and local tax deductibility has been modest, allowing for greater-than-expected base-broadening. Third, centrist Republicans appear to be receptive to the recent Senate proposal. If this remains the case, we would expect the bill could win 51 votes in that chamber."
But, there are "many" details that need to be addressed before tax reform is signed into law, the firm noted.
"We expect a slightly small cut to individual tax rates offset by slightly less individual base-broadening in order to accommodate separate political needs in the House and the Senate," Goldman said.
Additionally, while a 20% corporate tax rate may seem "attainable" it may need to be "phased in" to manage the overall cost of the reform, the firm added. And "limitations on net interest deductibility look more likely to follow the less restrictive House version, we believe, while changes to international corporate taxation look more likely to follow the Senate's proposals."
Ultimately, Goldman expects the House to pass the tax bill later this week. "The Senate is only a week behind the House, with the Senate Finance Committee likely to pass its tax reform proposal later this week as well."
As a result, full Senate consideration appears likely in December.
"The most likely scenario after that is a House-Senate conference committee, which seems likely to take until early 2018 to resolve, though we believe there is around a one-in-three chance that the bill could become law before year-end."
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