GOP Lawmaker Proposes Small-Business Tax Cut via Budget Reconciliation

Representative David Kustoff, a member of the House Ways and Means Committee, has introduced a bill aimed at reducing the tax burden on small businesses and family farms. The legislation proposes increasing the qualified business income (QBI) deduction for noncorporate business owners from the current 20% to 23%. The move is strategically timed to coincide with the budget reconciliation process. Senate Republicans are currently using this procedural tool to fund portions of the Department of Homeland Security (DHS) that have been shut down since February. Because reconciliation requires only a simple 50-vote majority in the Senate, it bypasses the 60-vote threshold normally required to overcome a filibuster. The 20% deduction was originally part of the 2017 Tax Cuts and Jobs Act and was made permanent in 2025. According to the Joint Committee on Taxation, the 20% deduction was estimated to reduce federal tax revenues by $57.6 billion in 2024 and $60.9 billion in 2025. If passed, the increase to 23% would provide additional liquidity to noncorporate business owners. However, the proposal faces significant hurdles, as proponents would need to identify a 'pay-for'—either through spending cuts or increased revenue elsewhere—to offset the cost of the tax cut to comply with reconciliation rules.