Sen. Kyrsten Sinema on Thursday night agreed to support the Democrats’ economic bill, giving Democrats the 50 votes they need to pass the legislation in the coming days.
In a statement, Sinema indicated that she won several changes to the tax provisions of the package, including removing the tax on carried interest, which would have impacted hedge fund managers and private equity. That proposal would have raised $14 billion.
“We have agreed to remove the carried interest tax provision, protect advanced manufacturing, and boost our clean energy economy in the Senate’s budget reconciliation legislation,” Sinema said. “Subject to the Parliamentarian’s review, I’ll move forward.”
Sinema’s support is critical given that all 50 Republicans will oppose a plan they argue would hurt the economy and cost far more than Democrats are contending – so any one Democratic defection could sink it.
As CNN earlier reported, Democrats agreed to add an excise tax on companies’ stock buybacks as part of the agreement.
“The agreement will include a new excise tax on stock buybacks that brings in far more revenue than the carried interest provision did, meaning the deficit reduction figure will remain at $300 billion,” a Democrat familiar with the agreement told CNN.
The $300 billion target in deficit reduction had been a key priority of Sen. Joe Manchin, whose agreement to the deal last week revived the legislation.
“The agreement preserves the major components of the Inflation Reduction Act, including reducing prescription drug costs, fighting climate change, closing tax loopholes exploited by big corporations and the wealthy, and reducing the deficit by $300 billion,” Senate Majority Leader Chuck Schumer said in a statement. “The final version of the Reconciliation bill, to be introduced on Saturday, will reflect this work and put us one step closer to enacting this historic legislation into law.”
Earlier Thursday, top Senate Democrats engaged in high-stakes negotiations with Sinema, actively discussing potential changes to major tax components in order to secure the Arizona moderate’s support.
In private discussions, Sinema had expressed concern over key parts of the Democrats’ plan to pay for their climate and health care package – imposing a 15% tax minimum tax on big corporations and taxing so-called carried interest, which would mean imposing a new levy on hedge fund managers and private equity.
As a result, Democrats had been scrambling to find new revenue sources to meet the goal of saving $300 billion over a decade.
“Failure is not an option,” said Sen. Richard Blumenthal, a Connecticut Democrat, expressing the view of much of his caucus earlier Thursday that Sinema would eventually get on board.
Schumer announced earlier on Thursday that the Senate will reconvene on Saturday and plans to take the first procedural vote to proceed to the bill. If the vote gets the backing of all 50 members of the Democratic caucus, there would then be up to 20 hours of debate. Following debate time, there would be a process colloquially referred to on Capitol Hill as “vote-a-rama,” which is the marathon series of electoral votes with no time limit before the final vote. If the bill ultimately passes, the House would need to act.
Democrats are trying to wrap up negotiations and pass their economic passage before leaving town for a month-long August recess. The bill still needs to be approved by the Senatearian in order to advance under the rules surrounding reconciliation, which would allow the legislation to be passed by a simple majority.
It’s unclear when the parliamentarian, Elizabeth MacDonough, will announce her decision on the package. A Democratic aid told CNN that the Senate Finance Committee’s energy provisions – most notably the clean energy credits – are scheduled to go in front of the Senatearian on Friday.
Schumer announced a deal with Manchin last week that contains a number of key goals for the party on health care costs, taxes and combating the climate crisis. The measure would invest $369 billion into energy and climate change programs with the goal of reducing carbon emissions by 40% by 2030. For the first time, Medicare would be empowered to negotiate the prices of certain medications, and it would cap out-of- pocket costs at $2,000 for those enrolled in Medicare drug plans. It would also extend expiring enhanced subsides for Affordable Care Act coverage for three years.
It’s not clear if all these provisions will survive thearian’s review.
Sinema was not part of the deal, learning of it when the news broke last week. She had refused to comment publicly on the deal, with her aides only saying she would wait until the Senatearian’s review is done before taking a position. Yet she had been making her clear demands with Democratic leaders, including seeking to add $5 billion to help the Southwest cope with its multi-year drought, according to multiple sources.
As Democrats courted her, Republicans and business groups madetheir concerns known. In a private call this week, the Arizona Chamber of Commerce and the National Association of Manufacturers, urged Sinema to press to change the corporate minimum tax. The president of the Arizona business group, Danny Seiden, told CNN that he expressed the business community’s opposition to the 15% tax provision, noting it would particularly hit manufacturers that take advantage of an accelerated depreciation tax deduction that lowers their tax burden.
“Is this written in a way that’s bad?” Sinema asked, according to Seiden, president of the Arizona Chamber of Commerce, who relayed the call to CNN.
“It gave me hope that she’s willing to open this up and maybe make it better,” Seiden said.
Two sources told CNN that Sinema had privately relayed those concerns to top Democrats, arguing it would hurt manufacturers including in her state.
At issue are changes proposed by Democrats on bonus depreciation that the GOP enacted in the 2017 tax law, which allows companies to deduct 100% of the cost of an asset the year it is placed in service. The new legislation proposes to phase that down starting next year.
Defending the new tax, the Democratic-led Senate Finance Committee released date on Thursday from the non-partisan Joint Committee on Taxation showing that up to 125 billion-dollar companies averaged only a 1.1 percent effective tax rate in 2019. The committee argues in its release that this shows the “rock-bottom tax rates” that some companies are able to pay.
“While we know that billion-dollar companies are avoiding paying their fair share, these tax rates are lower than we could have imagined,” said Senate Finance Chairman Ron Wyden, an Oregon Democrat. “We’re going to put a stop to it with our 15 percent minimum tax.”
This story and headline have been updated with additional developments Thursday.