Senate majority leader Sinema caves on the Inflation Reduction Act
One person (Sinema) appears to want to hold the latest attempt to pass some form of the America Rescue bill hostage.
A spokesperson for Sinema did not immediately respond to a request for comment. Without her support, Senate Democrats can’t advance the package in the 50-50 Senate over GOP resistance. The party is employing a tactic known as budget reconciliation to avoid a GOP filibuster and pass the bill along party lines.
Eliminating carried interest is a goal that’s eluded both Republican and Democratic administrations for a decade. Carried interest is the percentage of profits that hedge-fund managers receive from lucrative investments.
But that compensation is taxed at a lower capital gains rate that maxes out at 23.8% and doesn’t face a higher income tax rate like most Americans pay on wages from their job. Critics argue it amounts to a major hole in the tax code.
The Arizona Democrat opposed efforts last year to either close or narrow the loophole. But that puts her on a collision course with another critical vote: Sen. Joe Manchin of West Virginia.
Manchin has expressed strong support for the measure. Last year, he joined two Senate Democrats in sponsoring a bill eliminating carried interest. “The only thing I was adamant about was the carried interest,” he told reporters on Thursday.
On Wednesday, Manchin told reporters he “had not heard” reports that Sinema wanted Democrats to eject carried interest and no one had spoken to him about it.
“Kyrsten Sinema reportedly wants to block Democrats from narrowing the carried interest loophole benefiting rich investors”(yahoo.com)
So, it looks like one Primadonna does not know what the other Primadonna is doing (maybe, maybe Sinema and Manchin are not in cahoots together?).
Let us step back a little. In 2017, trump and Republicans passed a tax break bill and rearranged income tax returns using Reconciliation. In this case, if the bill is not deficit neutral by 2027, it goes away. It goes away for people but not for corporations.
Indirectly, Biden’s Inflation Reduction Act will impact people by a ~1% increase in costs. However, the neutralizing factor in Biden’s Inflation Reduction Act are extensions of the ACA subsidies, reduced prescription drug costs for seniors, lower-emission sources of energy, etc. There is a $68 billion dollar tax increase which comes from a “15% minimum tax on corporations reporting a profit to shareholders but use deductions, besides credits and other preferential tax treatments to reduce their effective tax rate well below the statutory 21 percent. It would also narrow the benefits of the carried interest tax provision, which largely benefits high earners who work in private equity and other parts of the financial industry.” Instead of taxing as ordinary income, which for most GPs would be the top marginal rate of 37 percent, it falls into the top capital gains rate of 20 percent.
Understanding carried interest is to understand the workings of DC. It’s an issue a lot of people care a little about but a few people (with a lot of money and lobbying clout) care a lot about. And Senator Kyrsten Sinema will hold it hostage until she gets her way,
Instead of torpedoing the act like Sinema and Manchin have done in the past, Sinema
and Manchin has decided on a different approach. Reporting from Congress:
Senate majority leader Sinema said Democrats had “agreed to remove” a key tax policy targeting wealthy investors that aimed to address what is known as the “carried interest loophole.” She also signaled they had made additional tweaks to a second provision that imposes a new minimum tax on corporations that currently pay nothing to the U.S. government.
“Democrats, Sinema reach deal on Inflation Reduction Act, after key changes to tax policies” (msn.com)
‘The latter set of revisions are likely to benefit some manufacturers, according to two people familiar with the matter, who spoke on the condition anonymity to describe the unreleased details. Many, “many” corporate executives, including local Arizona business leaders, had petitioned Sinema to consider the consequences of the tax in recent days.
With it, Democrats opted to seek a new 1 percent tax on corporate stock buybacks, a move that would make up at least some of the revenue that might have been lost as a result of the changes, the two people familiar with the matter said. And party lawmakers agreed to set aside new money at senate majority leader Sinema’s request to respond to climate issues including drought, according to the sources.
Senate majority leader Sinema said she would await a final review from the chamber’s parliamentarian — a critical step in the process that allows Democrats to move their spending bill — at which point she would “move forward” on the measure known as the Inflation Reduction Act of 2022.
It was said President Biden could be heard talking to himself about the development in the Oval Office. Describing it in a statement late Thursday as a “#G#@d!!*“critical step finally reached with senate majority leader Sinema to reduce inflation and the cost of living for America’s families.
With that, former Senate majority leader Schumer” and others retired to the Senate Pub for boilermakers. Preident Biden was expected to join them.”
“Analysis Deems Biden’s Climate and Tax Bill Fiscally Responsible” – The New York Times (nytimes.com)
“What to Really Watch for With Carried Interest” | Ben Koltun | Medium
“What closing the ‘carried interest loophole’ means for the Senate climate bill”: NPR
Democrats, Sinema reach deal on Inflation Reduction Act, after key changes to tax policies (msn.com)
“Will Krysten Sinema Change Parties?” Angry Bear, angry bear blog.
(Sinema refused to allow the carried-interest loophole to be ended, but was ok with allowing an excise tax on stock buyback payments, and increased aid to Arizona farmers affected by drought.)
Democrats, Sinema say they’ve reached agreement on economic package
Boston Globe – Aug 5t
… Sinema said Democrats had agreed to remove a provision raising taxes on “carried interest,” or profits that go to executives of private equity firms. That’s been a proposal she has long opposed, though it is a favorite of Manchin and many progressives.
The carried interest provision was estimated to produce $13 billion for the government over the coming decade, a small portion of the measure’s $739 billion in total revenue.
It will be replaced by a new excise tax on stock buybacks which will bring in more revenue than that, said one Democrat familiar with the agreement. The official, who was not authorized to discuss the deal publicly and spoke on condition of anonymity, provided no other detail.
Sinema said she had also agreed to unspecified provisions to “protect advanced manufacturing and boost our clean energy economy.”
She noted that Senate parliamentarian Elizabeth MacDonough is still reviewing the measure to make sure no provisions must be removed for violating the chamber’s procedures. “Subject to the parliamentarian’s review, I’ll move forward,” Sinema said.
The measure must adhere to those rules for Democrats to use procedures that will prevent Republicans from mounting filibusters, delays that require 60 votes to halt. …
Will the Manchin Deal Finally Kill the “Carried-Interest” Loophole?
NYer – Aug 2
… In recent decades, private-equity financiers such as Steve Schwarzman and Henry Kravis have benefitted greatly from the carried-interest deduction. The titans of private equity typically buy and sell companies using borrowed money and cash invested by their clients. They then charge investors in their funds an annual management fee of two per cent, and also pocket about twenty per cent of any profits that the funds generate. The current tax system allows them to classify much of their fee income as capital gains for tax purposes, even though it was their clients who risked their capital. Instead of paying the top federal income-tax rate of thirty-seven per cent on this money, they pay the capital-gains rate of twenty per cent. …
… Last year, as part of the Build Back Better agenda, the Biden Administration sought to eliminate it entirely. That effort perished on Capitol Hill after it ran into opposition from Senator Kyrsten Sinema, of Arizona, a recipient of campaign donations from many wealthy interests, including K.K.R. and the Carlyle Group, two big private-equity firms. …
Manchin and Sinema are a tag team. Manchin told Schumer a year ago that he would only go for a 1.5 trillion package. Schumer never told a soul so Bernie and the Squad flailed around the 3.5 trillion BBB for months all to no avail. Manchin did support some modest tax increases in his 1.5 trillion, possibly raising corporate rate to around 25%.
At the same time, Sinema made it known that she wouldn’t support any tax increases.
God I hope the Democrats can pick up two seats this year. If Fetterman takes PA, both Manchin and Sinema become much less powerful.
BTW the Democrats are really good at this kind of crap. Max Baucus dithered around for months in 2009 on Obamacare, lost D’s Congress a year later.
Penned a stern note off to Sinema yesterday, advising her I was not one of the favored minorities she appears to protect with her legislation. I want to see what she comes back with in a reply. If you read my words (I assume you do whether you like them or not), you know I do not take things lightly.
Dems do dilly-dally around a lot. Old time politics . . .
Manchin & Sinema usually seem to be ‘on the same page’, sort of.
Except Manchin is ostensibly tied to Resource Barons, like the Kochs, while Sinema has Wall St ties.
Maybe if Sinema is seen to have been successful wither her gambit, Manchin will have to renege.
Wait & see! (That way they can BOTH be winners!)
Manchin’s only concern is whether expenditures are covered by acceptable revenue.
Manchin is also probably thinking about the legacy of his immediate predecessor Robert Byrd (D-WVA), longest serving Senator ever.
Senate voting on tax, climate bill to begin Saturday, Schumer says
Boston Globe – Aug 5
Majority Leader Chuck Schumer said the Senate remains on track to begin votes on a landmark tax, climate and drugs bill Saturday despite lingering questions about how the Senate parliamentarian will rule and unresolved talks on drought relief money.
Schumer said that while his last-minute deal with holdout Senator Kyrsten Sinema meant dropping a plan to narrow a tax break for private equity, Democrats are fully behind a new $74 billion, 1% excise tax on stock buybacks that was added to the bill. …
Finance Leaders Reach Global Tax Deal Aimed at Ending Profit Shifting
NY Times – June 5, 2021
The Group of 7 nations agreed to back a new global minimum tax rate that companies would have to pay regardless of where they are based.
… Finance leaders from the Group of 7 countries agreed to back a new global minimum tax rate of at least 15 percent that companies would have to pay regardless of where they locate their headquarters.
The agreement would also impose an additional tax on some of the largest multinational companies, potentially forcing technology giants like Amazon, Facebook and Google as well as other big global businesses to pay taxes to countries based on where their goods or services are sold, regardless of whether they have a physical presence in that nation. …
(‘Procedural vote’ today?)
Democrats Eye a Major Shift in How Corporations Are Taxed
NY Times – Aug 6
(This arrangement is designed/intended to line up with other similar measures to be enacted in Europe – if not elsewhere – to see to it that corps do not move elsewhere to save on taxes, as I recall.)
Climate and Tax Bill Scales Crucial Senate Hurdle, Paving Path to Passage
NY Times – Aug 6 – 10:07 p.m. ET
Democrats united behind the plan and advanced it over unanimous Republican opposition, signaling that they had finally coalesced behind a bill that could become law within days.
A divided Senate took a crucial step on Saturday toward approving Democrats’ plan to tackle climate change, bring down health care costs and raise taxes on large corporations, with a test vote that paved the way to enact a significant piece of President Biden’s domestic agenda in the coming days.
The measure advanced on a party-line vote of 51 to 50, with all Republicans opposed and Vice President Kamala Harris breaking the tie.
The action suggested that Democrats, after more than a year of internal feuding and painstaking negotiation, had finally coalesced behind legislation that would provide hundreds of billions of dollars for climate and energy programs, extend Affordable Care Act subsidies and create a new federal initiative to reduce the cost of prescription drugs, particularly for older Americans. …
… Democrats were speeding the bill through Congress under the arcane budget process known as reconciliation, which shields certain tax and spending measures from a filibuster but also strictly limits what can be included.
Republicans remain unanimously opposed to the measure and have feverishly worked to derail it, fuming at the resurgence of a plan they thought was dead. Blindsided by the deal between Mr. Schumer and Mr. Manchin, they have scrambled to attack the bill as a big-spending, tax-hiking abomination that will exacerbate inflation and damage the economy at a precarious moment. …
The Group of 7 nations agreed to back a new global minimum tax rate that companies would have to pay regardless of where they are based.
Officials from the Group of 7 countries agreed (last year) to back a new global tax rate of at least 15 percent, which companies would have to pay regardless of where their headquarters are based. NYTimes October 8, 2021
‘Vote-a-rama’ slogs on as the Senate moves to pass a long-sought spending package
NY Times – Aug 7
The Senate was grinding its way through a series of rapid-fire amendments early Sunday morning on a climate, tax and health care spending package that Democrats have been working to pass for months amid fierce opposition.
Since two key centrist holdouts — Senators Joe Manchin III of West Virginia and Kyrsten Sinema of Arizona — said in recent weeks that they would support moving forward with the package, Democrats have been confident that they will be able to muscle it through, despite unanimous Republican opposition.
It carries many long-sought priorities for President Biden and his party, including hundreds of billions of dollars in climate and energy programs, a plan to lower the cost of prescription drugs and increases aimed at making the tax code more equitable.
But as part of the arcane budget process that Democrats are using to shield the package from a filibuster, they must navigate the measure through an hourslong ritual known as a “vote-a-rama,” which reconciliation measures must survive in order to be approved.
In the evenly divided Senate, all 50 members of the Democratic caucus will have to remain united to ward off changes proposed by Republicans and win final passage, which was expected later Sunday, so long as no last-minute changes upend the deal. The House is expected to approve the package on Friday.
Republicans, who have fumed over the resurrection of a measure that they thought dead, have acknowledged that their chances of derailing the bill are slim. …
NY Times: Most of the amendments we’ve seen overnight have been from Republicans, furious about legislation they unanimously oppose and looking to inflict political pain. But one Democrat — Senator Bernie Sanders of Vermont, who has been vocal about his disappointment with how much his party scaled back the bill — has also sought to force changes.
Just now, Sanders tried to woo the support of his caucus behind an amendment that would restore monthly expanded payments to most families with children — a plan all but one Democrat support. But it failed 1 to 97, as Democrats kept a promise to vote down most amendments to protect the overall package. (“C’mon Bernie,” Sherrod Brown of Ohio could be heard muttering on a hot mic after a slightly testy exchange.) …
Voting Slogs On as Senate Moves to Pass Long Sought Climate and Tax Bill
The Senate continued an overnight session of voting through amendments on a sweeping climate, tax and health care spending plan.
The bill, long sought by Democrats, could pass the Senate on Sunday, with House approval expected later this week.
A new corporate minimum tax could reshape investments and change how the government collects revenue
NY Times – Aug 6
At the center of the climate and tax package that Democrats appear to be on the verge of passing is one of the most significant changes to the United States’ tax code in decades: a new corporate minimum tax that could reshape how the federal government collects revenue and alter how the most profitable companies invest in their businesses. …
… Democrats have recreated a policy that was last employed in the 1980s: trying to capture tax revenue from companies that report a profit to shareholders on their financial statements while bulking up on deductions to whittle down their tax bills.
The re-emergence of the corporate minimum tax, which would apply to what is known as the “book income” that companies report on their financial statements, has prompted confusion and fierce lobbying resistance since it was announced last month.
Republicans have misleadingly tried to seize on the tax increase as evidence that President Biden was ready to break his campaign promises and raise taxes on middle-class workers. And manufacturers have warned that it would impose new costs at a time of rapid inflation.
The new 15 percent minimum tax would apply to corporations that report annual income of more than $1 billion to shareholders on their financial statements but use deductions, credits and other preferential tax treatments to reduce their effective tax rates well below the statutory 21 percent. It was originally projected to raise $313 billion in tax revenue over a decade, though the final tally is most likely to be $258 billion once the revised bill is completed.
The new tax could also inject a greater degree of complexity into the tax code, creating challenges in carrying out the law if it is passed. …
The Inflation Reduction Act would lower health care costs, reduce the deficit, and be a huge breakthrough in addressing climate change
Boston Globe editorial – August 5
… whatever happens, Democrats have to stay united. If they want to achieve meaningful progress on climate change, then they have no choice but to pass this legislation. There is no 10th inning in this game.
<a href=”https://www.nytimes.com/live/2022/08/07/us/climate-tax-deal-vote/vote-a-rama-slogs-on-as-the-senate-moves-to-pass-a-long-sought-spending-package?smid=url-share”>Senate Passes Climate and Tax Bill</a>
NY Times – August 7
The Senate passed legislation on Sunday that would make the most significant federal investment in history to counter climate change and lower the cost of prescription drugs, as Democrats banded together to push through major pieces of President Biden’s domestic agenda over unified Republican opposition.
The measure, large elements of which appeared dead just weeks ago amid Democratic divisions, would inject nearly $400 billion into climate and energy programs. Altogether, the bill could allow the United States to cut greenhouse gas emissions about 40 percent below 2005 levels by the end of the decade.
It would achieve Democrats’ longstanding goal of slashing prescription drug costs by allowing Medicare for the first time to negotiate the prices of medicines directly and capping the amount that recipients pay out of pocket for drugs each year at $2,000. The measure also would extend larger premium subsidies for health coverage for low- and middle-income people under the Affordable Care Act for three years.
And it would be paid for by substantial tax increases, mostly on large corporations, including establishing a 15 percent corporate minimum tax and imposing a new tax on company stock buybacks. …
Passage of the measure was a major victory for Mr. Biden and Democrats, who are battling to maintain their slim House and Senate majorities in November’s midterm congressional elections. Facing unanimous opposition by Republicans, who have used filibusters to block many elements of their domestic agenda, Democrats took full advantage of the Senate’s special budget rules to force through as much of it as they could with the support of all 50 members of their caucus.
The final tally was 51 to 50, with Vice President Kamala Harris casting the tiebreaking vote. The House planned to interrupt its summer break to reconvene briefly on Friday to clear the measure, sending it to Mr. Biden for his signature. …
Senate Passes Climate and Tax Bill, With All Republicans Opposed
Much shame on all (any?) ‘moderate’ GOP senators who passed up an opportunity to do what is right for the country, again.
No more news clips on this post
Just to review… About a week ago:
Surprise Deal Would Be Most Ambitious Climate Action Undertaken by US
NY Times – July 28
The announcement Wednesday of an agreement in the Senate almost instantly reset the role of the United States in the global effort to fight climate change. …
And it was delivered by Senator Joe Manchin III of West Virginia, the holdout Democrat who had been reviled by environmentalists and some of his own colleagues after he said this month that he could not support a climate bill due to inflation concerns.
“By a wide margin, this legislation will be the greatest pro-climate legislation that has ever been passed by Congress,” Senator Chuck Schumer, the Democratic majority leader, said in announcing the deal with Mr. Manchin. …