Why Johnson voted to move Senate tax bill out of committee

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Why Johnson voted to move Senate tax bill out of committee

Republican senator from Wisconsin says he has seen 'pretty good movement' over his concerns, but warns he still has 'very serious concerns' about the GOP tax reform bill.

This is a rush transcript from "Your World," November 28, 2017. This copy may not be in its final form and may be updated.

NEIL CAVUTO, HOST: All right, with us, the aforementioned Ron Johnson of Wisconsin. He voted yes for this to get out of committee.

That does not necessarily mean he would be an automatic yes vote when it comes before the general Senate after what is expected to be a pretty aggressive back-and-forth and debate.

Senator, thank you for joining us. Good to have you.

SEN. RON JOHNSON, R-WISCONSIN: Hello, Neil. How you doing?

CAVUTO: Good.

Is that pretty much your thinking, sir, let's fight this issue in the general Senate matter, take it up with your colleagues, get it out of colleague, so you could do that?

JOHNSON: Well, first of all, there was some pretty good movement so far on both of my issues.

And I am one of those deficit hawks. And I have been very supportive with Senator Corker and others have been working with the administration to try and come up with some kind of trigger, if we do not have the revenue growth, which I do believe we will have.

I what is going to probably propel us to success here is, within the Republican Conference, everybody agrees we need pro-growth tax reform. And so it is really just that legislative process. You are seeing the sausage-making occur right now to make sure that we can have a good a package as possible.

But, no, I have still got very serious concerns about those pass-through businesses. Oftentimes, the manufacturers, so important to a small towns, that really need to make sure that, as we make all businesses competitive globally, we do not leave behind those pass-through businesses that maintain their competitive position and balance within our economy.

CAVUTO: So, your argument was they are treated at a disadvantage to some of their larger counterparts, whose corporate rates will slide to 20 percent. Theirs will not.

What kind of overtures were your colleagues making to even that up a little bit?

JOHNSON: Well, we're talking very seriously.

Right now, the vast majority of pass-throughs will not be able to deduct state and local income taxes, where C-corps will.

I do not see how that is politically sustainable. It's certainly not fair. It widens with disparity and puts those pass-through businesses at a competitive disadvantage. We are talking about that. There's resistance.

But, again, what the president told me is, we need this thing -- this thing passed through committee, and we're going to fix your issue. I agree with you. We all recognize that this pass-through issue is an important one, and we're going to fix it.

And when the president of the United States tells you that he is going to fix your problem and he asks for your vote, I was more than willing to give it to him in conference here today.

CAVUTO: He's not on the committee, but your colleague from Montana colleague Steve Daines was among those who shared your concern about the treatment of businesses.

Do you know or did you get a chance to pass along the measures being expressed with you to improve that situation?

JOHNSON: Senator Daines and I are in pretty constant contact. And we are very unified in our position here that we certainly need to close that disparity that doubled basically under the Senate bill.

It is still a huge concern of ours, but, again, I like the movement so far. I think Senator Corker was obviously satisfied as well. The move is in the right direction, and we absolutely need pro-growth tax reform. It's just table stakes.

CAVUTO: All right, now, you mentioned as well at the onset, because at first when I heard you were a no vote a couple weeks ago, I thought it had to do with the deficit, because I know you are quite the deficit hawk.

I did not expect this no vote as a result of the treatment of businesses. But you are concerned about that, as you are concerned about adding to the debt.

By almost any measure, this will add to it over the course of the next decade. Are you that convinced that it will do the trick, and would you be open to this other idea expressed by a couple of your colleagues to build in tax increases if they don't measure up?

JOHNSON: Well, again, that is the trigger.

I am concerned that, if we do that, we have to target that properly, so it's spread evenly, so it does not do economic harm. But the best way of doing that is to make we have a really strong pro-growth tax package.

That's what I'm trying to work on. But one of the issues with the disparity -- the disparate treatments of pass-through is if we literally incentivize them to become C-corps, that would be a huge drain on federal revenue, as, all of a sudden, instead of paying a little over 30 percent, they're literally down paying at an effective 18.5 percent, because C-corps can deduct.

CAVUTO: Right.

JOHNSON: So, that would be a huge drain. I have done the calculations. It could hundreds of billions of dollars.

So, this is more -- this is in addition to making sure that we maintain that competitiveness of these businesses that are so innovative, that create so many jobs, the engine of our economy, that we do not incentivize them to become C-corps and have a massive revenue loss to the federal government.

CAVUTO: Now, are we going to see this individual mandate thing in or out? I mean, Susan Collins of Maine was told it would be out of there. That would secure her vote. How do you feel about that?

JOHNSON: Well, I hope we leave it in because I know, throughout the country and in Wisconsin, the individuals that are actually paying the penalty, over 80 percent make $50,000 or less.

They can't afford Obamacare. Obamacare premiums have been artificially increased, so the people paying the price are low-income individuals. It is a real shame.

The CBO, I think, is reevaluating the score as well, saying, yes, whatever positive impact the individual mandate had in getting people signed up for insurance has played out.

So, I want to certainly repeal the individual mandate, and I want to give those Americans some real relief from those penalties that they are paying right now.

CAVUTO: How did the meeting go today, Senator? Where were you seated, where were some of these senators who have had maybe an acrimonious relationship with the president, like Senators Flake and Corker you mentioned earlier? How did it go?

JOHNSON: Well, listen, it is always very cordial.

Every time I have been with President Trump, he's been very engaged, very gracious, quite honestly. So, he's actually quite funny. It's humorous at many times. So, it's just a really good luncheon meeting.

And, obvious, he was pushing the tax bill. And he certainly brought a couple of us over the top that had some real reservations, at least for this committee vote, but again also made that commitment. He will continue to work with us. Senate leadership will continue to work with us.

And so I got enough movement, I got enough assurances that we will get this fixed, that I was able to vote yes.

CAVUTO: Was John McCain there?

JOHNSON: I did not see John. I'm not quite sure.

CAVUTO: With Senators Corker and Flake, did they exchange pleasantries with the president or any of that?

JOHNSON: Oh, no, Senator Corker stood up. You will have to talk to him in terms of what he said.

But, again, it's all -- listen, this is -- as I said, this is the legislative process. This is the sausage-making. There is give-and-take. But I thought it was a very cordial luncheon all the way through.

CAVUTO: When you look at the timetable for this, Senator, are you confident that this could be voted on? They are literally talking by this weekend.

JOHNSON: That will be up to leadership in terms of when we can actually engineer those votes.

Right now, I just want to work with the White House, working with Senate leadership, and make sure that pass-throughs, we narrow that disparity, so they do not en masse become C-corps and hemorrhage that revenue, but also so they can stay competitive in our economy.

CAVUTO: Senator, you have read polls, as well as I. And it could be in the eye of the beholder. I understand that.

That a lot of Americans are frustrated with what appear to be, to them at least, generous provisions and allowances for corporations, not so much for them, permanent tax cuts for those corporations, ones that phase out for them.

So, to those who are looking at this and seeing it as a boon to big companies, would you be disappointed if those companies simply plowed those savings back into buying more stock or into increasing their dividend, doing none of the things that a lot of you and your colleagues have hoped they would do and still do, and that is hire people?

JOHNSON: Neil, that is one of the reasons I am really fighting for the pass-through entities that have to compete globally as also with those C-corps.

So, no, I am fighting hard to make sure that what we do spend in terms of the static score, we spend with a little more equity between pass-through businesses and C-corps.

I think it is a legitimate complaint right now about the Senate bill. It one of the reasons I have been raising Cain about it. But, again, hopefully, my colleagues recognize that same problem and we can fix it.

CAVUTO: All right, so, right now, with allowances that might be made for smaller, medium-size businesses, the pass-throughs, if all they could do, your colleagues could do, was allow them, as big companies could and can, write off their state and local taxes, would you be OK with that?

JOHNSON: Well, I would rather create that equal treatment in terms of state and local taxes by denying that deduction to C-corps, because it will raise revenues to bring down the rates for the pass-throughs.

But, Neil, let me just say more broadly, it's a table stakes issue. American businesses are now uncompetitive, both pass-throughs and C-corps. We have to bring down the corporate if we're going to compete globally.

It will spur economic growth, which is what raises wages. So, I am completely supportive of what we're trying to do with C-corps. I want to make sure we do not leave pass-through businesses behind.

That would be the basic defense, is, we simply can't allow our business taxes to be so uncompetitive globally. We have -- it's just a table stakes issue.

CAVUTO: All right, Senator, thank you very much for taking the time. I appreciate it.

JOHNSON: Have a great day.

CAVUTO: All right, you, too, Senator Ron Johnson.

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