GOP sets 23 percent deduction for small businesses to save tax bill

Senate GOP leaders have agreed to boost the deduction for pass-through businesses from 17.4 percent to 23 percent in a bid to save the teetering tax-reform bill. 

Sen. Ron Johnson (R-Wis.), who nearly derailed the legislation Thursday evening because he felt it did not do enough to help small and medium-sized businesses, announced the agreement. 

“I appreciate the Senate leadership’s willingness to work to close the gap between pass-through businesses and C corporations,” Johnson announced. 

Johnson on Thursday initially called for increasing the deduction for pass-through businesses to 25 percent, but settled for 23 percent.

Entering a meeting of the entire Senate Republican conference on Friday morning, Johnson said he did not know how the increased deduction would be paid for. 

Johnson had proposed cutting the deduction large C corporations take for state and local taxes to raise revenue to offset a bigger tax cut for pass-through businesses. 

But Senate Republican Whip John Cornyn (R-Texas), entering the same meeting, said state and local tax deductibility for large companies would not be eliminated. 

Cornyn and Senate Finance Committee Chairman Orrin Hatch (R-Utah) also told reporters that they felt confident they had 50 votes to pass the broader tax bill.