Rep. David Kustoff (R-Tenn.) leaves the House Republican Conference at the Capitol Hill Club on September 9, 2025.
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Rep. David Kustoff, a Republican member of the House committee that crafts tax policy, introduced a small business tax cut bill Tuesday that would add tax policy to the Republican Department of Homeland Security’s fundraising efforts.
Tennessee lawmakers first shared the bill with CNBC. This would raise the qualified business income deduction for unincorporated business owners to 23%, up from the 20% adopted as part of President Donald Trump’s 2017 overhaul of the U.S. tax code.
“This bill is good policy. It will benefit small businesses and family farms across the country,” Kustoff, a member of the House Ways and Means Committee, said in an interview on CNBC.
Kustoff’s proposal, which is co-sponsored by six House Republicans, was introduced on the same day that Senate Republicans released legislative language that would begin the process of funding parts of the Department of Homeland Security that have been closed since February.
Republican leaders plan to use the budget reconciliation process to fund parts of DHS that Democrats oppose over excessive immigration enforcement policies. Budget reconciliation is a procedural tool used to pass spending-related issues and requires a simple 50-vote majority in the Senate, which typically requires 60 votes to overcome a filibuster. It’s the same process Republicans used to pass a massive tax and spending package known as “The One Big Beautiful Bill” in 2025.
The budget reconciliation resolution introduced Tuesday does not give instructions to the House and Senate tax-writing committees, but Kustoff said they may amend the bill before it passes. And there is talk of a subsequent budget reconciliation bill before the end of this Congress, which could provide additional opportunities for Republicans to pursue tax and spending priorities that are unlikely to win support from Democrats.
“It’s happening in real time,” Kustoff said of the settlement process. “That’s why I thought, and my colleagues thought, that we should introduce this bill now. There’s a chance we can get on the reconciliation train.”
The idea of a small business deduction itself was meant to balance out the tax breaks given to large corporations as part of the 2017 Republican 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 that proposal can be expensive. In December 2023, the Joint Committee on Taxation, a bipartisan Congressional committee that supports tax professionals, estimated that the 20% deduction would reduce federal tax revenue by $57.6 billion in 2024 and $60.9 billion in 2025.
Still, Kustoff said he was optimistic there could be broad Republican support. However, if included in a reconciliation bill, proponents would need to find a “compensation” to offset the costs — something that would reduce spending or raise revenue.
“But I would argue that from a revenue perspective, the benefits offset the costs,” Kustoff said.
