Republican tax bill faces obstacle over business
WASHINGTON — On the eve of the House’s vote to pass a far-reaching $1.5 trillion tax cut, Speaker Paul Ryan of Wisconsin placed a hasty phone call to his state’s senior senator, Ron Johnson, in hopes of resolving an unlikely conflict in his own backyard.
Johnson had become the first Senate Republican to say publicly that he could not vote for the Senate’s version of the tax bill. During the phone call Wednesday afternoon, Ryan, who had campaigned heavily for Johnson in 2016, posed an essential question, according to the senator: “What are you going to need?”
What Johnson needs, he said in an interview from Wisconsin on Friday, is for the bill to treat more favorably small businesses and other socalled pass-through entities — businesses whose profits are distributed to their owners and taxed at rates for individuals.
Such entities, including Johnson’s family-run plastics manufacturing business, account for more than half the nation’s business income, and the senator says the tax bill would give an unfair advantage to larger corporations.
“I just have in my heart a real affinity for these owner-operated pass-throughs,” he said. “We need to make American businesses competitive — they’re not right now.
“But in making businesses competitive, we can’t leave behind the pass-throughs.”
The sudden fissure between longtime allies laid bare the challenge that Republicans face as the tax bill leaves Ryan’s care and navigates the rough waters of the Senate.
Senate Republican leaders, who are seeking a major legislative victory before year’s end, hope to bring their tax bill, which differs significantly from the House measure, to a vote after Thanksgiving.
Offering concessions to skeptical senators one by one could prove an impossible task for Republican leaders, who face restraints under Senate rules on the total size of the tax cut package. Those leaders are hoping, instead, that they can pull off a version of Ryan’s strategy: all but daring holdouts to derail the party’s top priority.
Republicans are desperately seeking their first significant legislative achievement of the Trump presidency.
Johnson’s public wavering elicited calls from President Donald Trump and a visit from Treasury Secretary Steven Mnuchin and National Economic Council Chairman Gary Cohn, all of whom sounded out Johnson about his concerns.
Johnson is a firm believer in the power of tax cuts to lift economic growth. Since winning reelection in 2016, he has not shied from voicing displeasure with the Republican leadership. He was an early and vocal critic of the party’s legislation to replace the Affordable Care Act, though he ultimately voted in favor of the bill.
His concerns with the Senate’s tax bill stem not from its overarching goal of cutting taxes but with how the bill treats small businesses and large corporations.
Johnson says the legislation is tilted in favor of big companies, and he is eager to find a way to level the playing field.
Ryan, who was his party’s 2012 vice presidential nominee, helped Johnson’s ascendance to the Senate.
Ryan barnstormed Wisconsin on Johnson’s behalf as his come-from-behind re-election bid took off last year, and the two have forged a bond in Washington.