What’s in Sinema’s 11th hour changes to Manchin bill

Arizona Democratic Sen. Kyrsten Sinema succeeded in knocking out a $13 trillion provision despised by the hedge fund industry before she announced she had agreed to ‘move forward’ on major legislation heading to its first key vote Saturday.

With enormous leverage in the 50-50 Senate, Sinema was able to push to jettison the provision, which the White House and Sen. Joe Manchin (D-W.Va.) touted as a way to force wealthy hedge funders to take ordinary income rather than booking their earnings as capital gains taxed at a lower rate.

It would have provided about $13 billion in revenue for the sweeping climate and health package that Democrats have rebranded as the Inflation Reduction Act.

But leaders agreed to fill the hole with other revenue provisions, and the latest deal would still reduce the deficit by about $300 billion, Majority Leader Charles Schumer said Thursday night while announcing the latest deal. 

‘We have agreed to remove the carried interest tax provision, protect advanced manufacturing, and boost our clean energy in the Senate’s budget reconciliation legislation,’ Sinema said in a statement Thursday, after keeping Democrats guessing for days about whether she would come on board.

Instead, the new ‘reconciliation’ deal would hit corporations with a 1 per cent excise tax when they engage in stock buybacks, a practice that raises share prices but critics say siphons off funds that otherwise might go to investment.

In 2018, large companies spent $806 billion on stock buybacks, according to Sens. Sherrod Brown (D-Ohio) and Ron Wyden (D-Ore.), who introduced their own stock buyback legislation last year. They included an exemption for employee pension plans.

Democrats are also eyeing provisions costing about $100 billion that would provide exemptions that manufacturers are pushing for in the new 15 per cent corporate minimum tax.

They are seeking exemptions for existing tax credits for depreciation, Bloomberg reported. Without the exemption, the package could discourage investment and hurt manufacturing overall, they argue. 

The version of the bill Manchin and Schumer agreed to would generate $739 billion in revenue, slash the deficit by about $300 billion, with $433 billion in government spending on climate while extending Affordable Care Act subsidies.

Senator Joe Manchin III (D-W.Va.), negotiated the outlines of the Inflation Adjustment Act with Majority Leader Charles Schumer

Sinema also secured funds for drought relief, after keeping Democrats guessing for days

Senate Majority Leader Chuck Schumer (D-N.Y.) has set up a Saturday vote to move to the package

President Joe Biden is in sight of a major legislative win, as he prepares to sign legislation on semiconductors and support for veterans

Schumer said in a statement: ‘I am pleased to report that we have reached an agreement on the Inflation Reduction Act that I believe will receive the support of the entire Senate Democratic conference. I have had many productive discussions with members of our conference over the past three days and we have addressed a number of important issues they have raised.’

He said the deal ”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. 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.” 

‘Subject to the Parliamentarian’s review, I’ll move forward,’ Sinema said – pointing to the congressional scorekeeper who will rule on whether the deal’s provisions are in keeping with Budget rules to go on the special ‘reconciliation’ bill that is protected from filibuster.

Notably, she used language that could commit her to voting to proceed to the bill, but stopped short of saying she would vote for the final package.

Sinema told some of her wealthy donors at a Wednesday fundraiser that it didn’t make sense to harm the private equity industry by closing the carried interest loophole, the Wall Street Journal reported. 

Democrats also agreed to Sinema’s push for billion in drought relief programs, which would benefit her parched state. 

Sinema had been seeking about $5 billion in drought resiliency funds, which would benefit her parched state, Politico reported this week.