Pass-Through Tax Agreement Reached Between House and Senate GOP

20 percent rate enough to win over Johnson

Wisconsin Sen. Ron Johnson. (Bill Clark/CQ Roll Call)

Updated 12:52 p.m. | House and Senate Republicans have agreed to set the deduction for pass-through business income at 20 percent, two sources confirmed to Roll Call.

Members said discussions are still fluid and nothing is final until both chambers sign-off.

The agreement is noteworthy, as the provision would mirror one originally included in the Senate version of the tax legislation, though at a reduced rate. The package passed by the chamber earlier this month would have put the income deduction at 23 percent. The House proposed a system tied to a lower top tax rate for pass-through income.

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Sen. Ron Johnson of Wisconsin and Steve Daines of Montana pushed for the 23 percent level and their support for the final Senate bill hinged in part on that measure.

The compromise on the tax treatment of pass-through businesses was enough to win over Johnson.

“If it’s married with 37 percent top rate it ends up being the same thing basically,” he said. 

The Senate had hoped to send the House a final tax proposal Tuesday evening that likely included a 21 percent corporate tax rate, a top income bracket of 37 percent and a compromise $750,000 cap on mortgage interest deduction, sources said.

Republican and Democratic members of the tax conference will meet Wednesday for the first, and likely last, public meeting.

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