Rep. David Kustoff, R-Tenn., leaves a meeting of the House Republican Conference at the Capitol Hill Club, Sept. 9, 2025.
Tom Williams | Cq-roll Call, Inc. | Getty Images
Rep. David Kustoff, a Republican member of the House committee that writes tax policy, introduced a bill Tuesday to lower taxes on small businesses in a bid to add tax policy to the GOP Homeland Security funding effort.
The Tennessee lawmaker first shared the bill with CNBC. It would increase the qualified business income deduction for noncorporate business owners to 23%, up from the 20% that was adopted as part of President Donald Trump‘s 2017 overhaul of the U.S. tax code.
“This bill is good policy. It benefits small businesses across the country. It benefits family farms,” Kustoff, a member of the House Ways and Means Committee, said in an interview with CNBC.
Kustoff’s proposal, which has six House GOP co-sponsors, was introduced the same day Senate Republicans released legislative language kick-starting the process to fund part of the Department of Homeland Security, which has been shut down since February.
Republican leaders are planning to use the budget reconciliation process to fund the parts of DHS that Democrats have objected to in protest over what they consider overaggressive immigration enforcement policies. Budget reconciliation is a procedural tool used to pass spending-related matters that requires a simple 50-vote majority in the Senate, as opposed to the 60 votes normally required to overcome a filibuster. It’s the same process Republicans used in 2025 to pass their massive tax and spending package known as the “one big beautiful bill.”
That budget reconciliation resolution introduced Tuesday did not give instructions to tax-writing committees in the House or Senate, but Kustoff said there is a possibility for amendments to the bill before passage. And there is talk about subsequent budget reconciliation bills before the end of this Congress, which could provide additional opportunities for Republicans to pursue tax and spending priorities that otherwise are unlikely to garner Democratic support.
“It’s moving in real time,” Kustoff said, of the reconciliation process. “And that’s a reason I thought, and my colleagues thought, that this bill should be filed now. There’s a possibility that we could get on the reconciliation train.”
The idea of a deduction for small businesses itself was meant to balance out the tax cuts given to larger corporations as part of the 2017 GOP tax bill, Kustoff said. The Tax Cuts and Jobs Act reduced the federal corporate income tax rate from 35% to 21%.
The 20% small-business deduction was made permanent in the 2025 Republican tax and spending bill.
But the proposal could be expensive. The Joint Committee on Taxation, a nonpartisan congressional panel that assists tax writers, estimated in December 2023 that the 20% deduction would reduce federal tax revenues by $57.6 billion in 2024 and $60.9 billion in 2025.
Still, Kustoff said he is optimistic there could be broad Republican support, though if it were included in reconciliation legislation, proponents would need to find a “pay-for” — something to cut spending or increase revenue — to offset to the cost.
“I make the argument, though, that the benefits, from a revenue standpoint, would offset the cost,” Kustoff said.
