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When Democratic Sens. Chuck Schumer and Joe Manchin announced a breakthrough agreement last week and unveiled the Inflation Reduction Act, there were sighs of relief throughout the progressive political world — followed by a nagging question:
Is Sen. Kyrsten Sinema on board?
In the days that followed, Democratic leaders proceeded to work through the process, meeting with the parliamentarian’s office, scheduling votes, and expressing great optimism that this hard-fought reconciliation package would finally cross the finish line, delivering a landmark victory, not just for President Joe Biden and his party, but for the whole country. And yet, there was no shaking the unanswered question:
Is Sen. Kyrsten Sinema on board?
It took a while, but last night, Democrats were finally able to answer the question in a satisfying way. NBC News reported:
Sen. Kyrsten Sinema signed off on sweeping Democratic legislation Thursday that would provide new spending to mitigate climate change and extend health care access while taxing corporations. The Arizona Democrat’s announcement likely unlocks the votes needed to pass the bill in the Senate.
The sticking point was a relatively obscure tax break called the “carried interest loophole,” which is sometimes referred to as “the carry.” In case anyone needs a refresher, this is the tax break that taxes private equity and venture capital income at a lower, 15 percent rate, unavailable to the rest of us. Hedge-fund managers and Wall Street executives have fought tooth and nail to protect this loophole, especially as the Obama White House tried to eliminate it.
Many Democrats continued to work on this, and both Schumer and Manchin made a point to include it in their revamped Inflation Reduction Act. Sinema, however, has consistently said she’d oppose closing the loophole — at least in this bill — and yesterday, she successfully had it removed from the pending reconciliation package. Democratic leaders also tweaked the structure of a 15 percent corporate minimum tax and threw in some drought relief funding to benefit Arizona.
Sinema endorsed the package soon after.
What about the money that closing the carried interest loophole was poised to generate? The New York Times summarized a different tax policy that will take its place:
Democrats instead added a new 1 percent excise tax that companies would have to pay on the amount of stock that they repurchase, said one Democratic official, who disclosed details of the plan on the condition of anonymity. That provision, the official said, would ensure that the package still reduces the federal deficit by as much as $300 billion, the same amount Democrats aimed for with the original deal and a key priority for Mr. Manchin.
While it’s certainly disappointing to many on the left that the carried interest loophole will remain in place, at least for now, the Center on Budget and Policy Priorities’ Chuck Marr explained that a 1 percent excise tax on stock buybacks is actually an entirely worthwhile policy.
As for what happens now, the Senate is off today, but members are scheduled to return to Capitol Hill tomorrow, at which point there will be a procedural vote to formally begin consideration of the Inflation Reduction Act.
If all goes according to plan, that initial vote will be followed by up to 20 hours of debate, which will lead to votes on a series of Republican amendments — the part of the process known as the “vote-a-rama” — that will probably push the process into early next week. Watch this space.