A second Republican announced Monday that he would vote against the Senate version of the tax bill, underscoring the difficulty GOP leaders face this week in trying rounding up 50 votes for the bill.
Sen. Steve Daines of Montana said he opposes the bill as written because of its provisions relating to small businesses, an aide said. Although the bill contains a special tax cut for those businesses, Daines said it is not big enough and that it would place those companies at a disadvantage to the C-corporations that would get a 20 percent tax rate under the legislation.
"Before I can support this bill, this improvement needs to be made," the Republican said in a statement provided by his office. "I remain optimistic and will continue working with my colleagues to find a solution."
Sen. Ron Johnson of Wisconsin opposes the bill for the same reason, although he has said that he is encouraged by the efforts of the Trump administration and Senate GOP leadership to work toward allaying his concerns.
Senate Majority Leader Mitch McConnell can lose only two Republicans and still pass the tax bill without Democratic help. Several other Republicans have suggested that they have qualms about other aspects of the legislation, but only Daines and Johnson have said they won’t vote for it without changes.
Their concern relates to the provisions for pass-through businesses, which comprise partnerships, sole proprietorships, S-corporations, and other companies whose earnings pass straight through to owners’ individual returns, rather than being taxed at the corporate level. While most pass-throughs are small businesses or side businesses, some are large companies.
The Senate bill includes a new 17.4 percent deduction on income earned by such pass-throughs, effectively bringing their top tax rate down to about 32 percent. But some businesses would be limited from claiming that deduction, a feature that Johnson has criticized.
Increasing the size of the small business tax break likely would increase the revenue lost by the tax bill, requiring lawmakers to make compromises on other provisions in the bill.
The bill has been endorsed by small business groups, including the National Federation of Independent Business.