WASHINGTON — On the eve of the House’s vote to pass a far-reaching $1.5 trillion tax cut, Speaker Paul D. 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, 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 so-called 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.
“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, where different priorities within the party could sink the bill if not adequately addressed.
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. But it is unclear whether it has enough support to pass in the narrowly divided chamber.
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, who control Congress and the White House, are desperately seeking their first significant legislative achievement of the Trump presidency. Johnson’s public wavering elicited calls from President Trump and a visit from Treasury Secretary Steven Mnuchin and National Economic Council Chairman Gary D. 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. He grew up on a Wisconsin farm, worked as an accountant after college, and spent more than 30 years immersed in his family’s plastics company before assuming his Senate seat in 2010.
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 reelection bid took off last year, and the two have forged a bond in Washington.
“You know what we control, with Ron Johnson’s election?’’ Ryan asked the crowd at a rally the night before the election. “We in Wisconsin control who controls the United States Senate. If you want to see anything get done — pass it in the House, get it from the Senate and get it on a Republican president’s desk and get it into law — Ron Johnson’s got to get reelected.’’
But the dynamics of the two chambers differ markedly. With the House tax bill, Ryan and other Republican leaders employed a command-and-control process and a rocket-speed schedule to minimize Republican dissent. The strategy worked: The bill sailed through the House on Thursday along party lines, two weeks after it was introduced.
In the Senate, where the party’s margins are much smaller and individual members are more powerful, party leaders will need to win over what could be a half-dozen or more wavering Republicans, beginning with Johnson. Others include Senators Bob Corker, Jeff Flake, Lisa Murkowski, Susan Collins, and John McCain.
The Senate bill cleared the Senate Finance Committee on Thursday night. hile rates would fall for Johnson’s family business under the bill, they would not fall as much as those for larger businesses.
Johnson’s preferred approach would be to force all corporations to become pass-throughs, a move he says would equalize tax treatment and encourage more corporate investment. But he concedes that his GOP colleagues are not likely to add such a provision to their tax bill. “Unfortunately,’’ he said, “it’s pretty late in the game.’’
