Ron Johnson on Wednesday became the first Republican senator to express opposition to the GOP tax bill currently working its way through the Finance Committee.
The Wisconsin senator said he's worried the bill would put non-corporations at a disadvantage to C corporations when it comes to benefitting from the new 20 percent tax rate, a worry he first raised in October before the bill was unveiled.
"These businesses truly are the engines of innovation and job creation throughout our economy, and they should not be left behind," Johnson said in a statement. "Unfortunately, neither the House nor Senate bill provide fair treatment, so I do not support either in their current versions."
He added, though, that he hopes to work with colleagues to be able to support the final bill.
Republicans can only lose two votes in the Senate and still pass tax legislation without Democratic help.
The Senate bill creates a special tax break for pass-through businesses, which are companies whose earnings pass straight through to owners' individual returns rather than being taxed at the corporate level. Those partnerships, sole proprietorships and S corporations make up the vast majority of businesses.
Under the Senate bill, pass-through businesses would be allowed to deduct 17.4 percent of earnings from taxable income. Applying that deduction to the top individual rate of 38.5 percent means those companies would effectively face a top rate of around 32 percent, higher than the 20 percent rate for C corporations.
But that break would be limited to specific industries and capped for others, curbing the benefit to some firms.
Nevertheless, the provision has received support from outside small business groups, including the National Federation of Independent Business.