U.S. Senate Majority Leader Chuck Schumer (D-NY) holds his weekly press conference following the Democratic Caucus’ caucus luncheon at the U.S. Capitol in Washington, August 2, 2022.
Jonathan Ernst | Reuters
Senate Majority Leader Chuck Schumer said Friday that Democrats have “no choice” but to remove a key tax provision from their big spending bill to win over Sen. Kirsten Sinema.
Sinema, a centrist Democrat from Arizona, dropped her support for the Deflation Act, the sweeping bill that includes much of the Biden administration’s agenda on taxes, climate and health care. Senate Democrats need her support to push the bill through the Senate on a party-line vote using the budget reconciliation process — which requires a simple majority vote in the Senate, split 50-50 along party lines.
Sinema announced Thursday night that it would indeed support the legislation after an agreement “to eliminate the carried interest tax provision.”
She was referring to the bill’s inclusion of language that would narrow the so-called carried interest loophole, a feature of the tax code that Republicans and Democrats — including former President Donald Trump — have tried to close.
Carried interest refers to compensation that hedge fund managers and private equity managers receive from their firms’ investment earnings. After three years, that money is taxed at a long-term capital gains rate of 20%, instead of a short-term capital gains rate of 37%.
The Inflation Reduction Act was intended to close that loophole by extending the short-term tax rate to five years. The bill’s provision was projected to raise $14 billion over a 10-year period.
“I pushed for it to be included in this bill,” Schumer, D-N.Y., said of the proposal to narrow the loophole.
But “Senator Sinema said he wouldn’t vote for the bill, he wouldn’t even go forward with it unless we got it out,” he said. “So we had no choice.”
Sinema stressed Thursday night that after the passage of the reconciliation bill, “I look forward to working with [Sen. Mark Warner, D-Va.] to enact carried forward tax reforms, protect investment in the American economy, and promote continued growth while closing the most egregious loopholes that some abuse to avoid paying taxes.”
A Sinema spokeswoman defended the senator’s record when asked by CNBC on Friday about Schumer’s remarks and her position on carried interest.
Sinema “has been clear and consistent for more than a year that he will only support tax reforms and revenue options that support Arizona’s economic growth and competitiveness,” the spokeswoman said. “At a time of record inflation, rising interest rates and slowing economic growth, discouraging investment in Arizona businesses would harm Arizona’s economy and its ability to create jobs.”
Schumer said another tax portion of the Cut-Inflation Act was taken out to secure the Sinema deal. It came on the heels of a proposal to impose a 15% corporate alternative minimum tax aimed at wealthy corporations accused of dodging their tax obligations. It was projected to raise $313 billion — more than 40% of the account’s revenue.
While that part of the bill was changed, “$258 billion of it remains, so the majority remains,” Schumer said.
And while the carried interest provision was repealed, Schumer said Democrats added an excise tax on stock buybacks that would bring in $74 billion. He said multiple lawmakers he spoke with were “excited” about this update.
“I hate share buybacks. I think it’s one of the most self-serving things that corporate America does,” Schumer said. “I would like to remove them.”
Add Comment