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How Wall Street wooed Sen. Kyrsten Sinema and preserved its multi-billion dollar carried interest tax break

US Senator Kyrsten Sinema (D-AZ) waits for an elevator to go to the Senate floor at the US Capitol in Washington, US August 2, 2022.

Jonathan Ernst | Reuters

Long before Sen. Kyrsten Sinema, D-Ariz., held up a massive spending bill that promised to create jobs, invest in clean energy and tax the rich delivering on some of President Joe Biden’s and the Democratic party’s top campaign promises — those working at Wall Street investment firms had donated millions to the freshman senator’s campaign.

One of her main objections was the bill’s so-called carried interest tax provision — which would have closed an arcane loophole in tax law that allowed hedge fund managers, law firm partners and private equity executives, among others, to pay significantly less taxes than ordinary workers.

Closing that loophole, which was estimated to raise $14 billion in tax revenue over the next decade, was supposed to help pay for $433 billion in spending on climate and health initiatives.

To get Sinema’s vote, and the bill passed, Senate Majority Leader Chuck Schumer said Democrats had “no choice” but to drop that provision from the broader Inflation Reduction Act. The bill instead imposes a 1% tax on all corporate share buybacks along with a minimum corporate tax rate of 15% on companies with more than $1 billion in revenues. The massive spending-and-tax package squeaked through the evenly divided Senate 51-50 on Sunday with Vice President Kamala Harris’ tie-breaking vote. It’s expected to pass the House later this week.

American Investment Council

As Biden rallied support in the Senate just over a year ago to close the loophole, the head of the trade group representing the world’s largest private equity firms began cranking up the pressure on Sinema and fellow Arizona Sen. Mark Kelly, who is also a Democrat.

“Arizona Sens. Kyrsten Sinema and Mark Kelly will be critical voices and votes in the upcoming infrastructure debate,” Drew Maloney, the president and CEO of the American Investment Council, wrote in an op-ed published by an Arizona news outlet. The trade group represents some of the world’s largest private equity firms, including Blackstone, Apollo Global Management, Carlyle Group and KKR. “I urge them to continue supporting private investment’s role in helping small businesses here in Arizona and across the country,” he added.

One of the group’s top priorities was then, and is now, to preserve “carried interest capital gains and prevent elimination of interest deductibility.”

“Our team worked to ensure that members of Congress from both sides of the aisle understand how private equity directly employs workers and supports small businesses throughout their communities,” Maloney said in a statement to CNBC. “Our advocacy helped prevent punitive tax increases that would make it harder for investors to continue to support jobs, small businesses, and pensions in every state.”

Sinema’s been fighting to help preserve the loophole since at least last year when she told Democratic leaders she opposed closing the carried interest tax break. It was subsequently stripped out of a House bill, according to NBC News.

Sinema’s opposition, along with a bevy of concerns from Sen. Joe Manchin, DW.V., helped sink a much more sprawling version of the bill, which was significantly back to win over the two moderate Democrats.

‘What’s best for Arizona’

“Senator Sinema makes every decision based on one criteria: what’s best for Arizona,” Sinema’s spokeswoman Hannah Hurley told CNBC in an email. She said Sinema has been clear for over a year that she will only support tax reforms and revenue options that support Arizona’s economic growth and competitiveness. Sinema believes that “disincentivizing” investments in Arizona businesses would hurt the state’s economy and ability to create jobs, Hurley said.

In the weeks before Sunday’s vote, Sinema’s office was inundated with calls from lobbyists representing hedge funds, private equity firms and other money managers arguing against closing the carried interest tax loophole, according to people familiar with the matter. In the runup to last week’s deal, Ella’s senator and her staff fielded numerous in-person meetings with the industry, said some of the people familiar with these meetings, asking not to be identified to speak freely about private efforts to connect with Sinema .

Since she was elected to the Senate in 2018, Sinema has been a sympathetic ear to the industry. Last September, she huddled for a lunch meeting at a Philadelphia restaurant with Michael Forman, who manages at least $34 billion as CEO of a Philly-based investment firm FS Investments, and one of his executives, according to people familiar with the lunch. Forman did not return emails and calls seeking comment.

“Every single major industry that is not supportive of what’s in there is meeting with Sinema and she is meeting with anybody and everybody,” a lobbyist representing some of the biggest investment firms in the world told CNBC before Schumer announced late Thursday that Democrats agreed to drop the carried interest provision to get her vote. Sinema said she would work separately “to enact carried interest tax reforms.”

Private equity donors

Even before Sinema was elected to the Senate in 2018, she supported private equity investors as a member in the House of Representatives. In 2016, Sinema said the industry provided “billions of dollars each year to Main Street businesses,” according to the New York Times.

Sinema won a coveted seat on the powerful Banking Committee and made quick work networking with — and raising donations from — the industry she would oversee. Since the start of the 2018 election cycle, she’s raked in at least $2 million from the securities and investment industry — outraising Senate Banking Chairman Sherrod Brown’s $770,000 in industry donations over the same time, according to Federal Election Commission data analyzed by the nonpartisan campaign finance watchdog OpenSecrets. Both Sinema and Brown, D-Ohio, are up for reelection in 2024.

Sinema’s take includes $10,000 in campaign donations from the American Investment Council’s political action committee, half of which was donated to her campaign after Maloney’s op-ed ran last year.

Employees at private equity firms Kohlberg Kravis Roberts, the Carlyle Group and Apollo Global Management donated more than $95,000, combined, to Sinema from the 2018 election through the current 2022 election cycle, according to campaign finance data.

That includes $11,600 in combined donations from KKR co-founders Henry Kravis and George Roberts, according to Federal Election Commission filings. Records show that Carlyle’s and Apollo’s political action committees also donated a combined $15,000 to Sinema’s reelection campaign.

Representatives for KKR and Carlyle declined to comment. Representatives for Apollo and Blackstone did not return requests for comment.

‘Hats off to the P/E lobby!’

The reason why some of Wall Street’s wealthiest money managers want to preserve the carried interest loophole is because it taxes their profits at a lower rate than the ordinary income. Instead of paying the standard individual income tax rates of up to 37% for individuals who earn more than $539,900 ($647,850 for married couples filing jointly), carried interest is taxed at the capital gains rate, which is usually around 20% for high-income earners, as long as the investment is held for at least three years.

Democrats wanted to make executives hold those investments for at least five years to get the better rate. The industry defends the carried interest tax break, saying it helps preserve investments that benefit small businesses. Critics say it’s just a massive tax break for the rich.

Lloyd Blankfein, the former CEO of Wall Street investment bank Goldman Sachs, mockingly congratulated the private equity industry on Twitter after the carried interest provision was stripped from the Inflation Reduction Act: “Hats off to the P/E lobby! After all these years and budget crises, the highest paid people still pay the lower capital gains tax on earnings from their labor.”

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US

How Wall Street wooed Sen. Kyrsten Sinema and preserved its multi-billion dollar carried interest tax break

US Senator Kyrsten Sinema (D-AZ) waits for an elevator to go to the Senate floor at the US Capitol in Washington, US August 2, 2022.

Jonathan Ernst | Reuters

Long before Sen. Kyrsten Sinema, D-Ariz., held up a massive spending bill that promised to create jobs, invest in clean energy and tax the rich delivering on some of President Joe Biden’s and the Democratic party’s top campaign promises — those working at Wall Street investment firms had donated millions to the freshman senator’s campaign.

One of her main objections was the bill’s so-called carried interest tax provision — which would have closed an arcane loophole in tax law that allowed hedge fund managers, law firm partners and private equity executives, among others, to pay significantly less taxes than ordinary workers.

Closing that loophole, which was estimated to raise $14 billion in tax revenue over the next decade, was supposed to help pay for $433 billion in spending on climate and health initiatives.

To get Sinema’s vote, and the bill passed, Senate Majority Leader Chuck Schumer said Democrats had “no choice” but to drop that provision from the broader Inflation Reduction Act. The bill instead imposes a 1% tax on all corporate share buybacks along with a minimum corporate tax rate of 15% on companies with more than $1 billion in revenues. The massive spending-and-tax package squeaked through the evenly divided Senate 51-50 on Sunday with Vice President Kamala Harris’ tie-breaking vote. It’s expected to pass the House later this week.

American Investment Council

As Biden rallied support in the Senate just over a year ago to close the loophole, the head of the trade group representing the world’s largest private equity firms began cranking up the pressure on Sinema and fellow Arizona Sen. Mark Kelly, who is also a Democrat.

“Arizona Sens. Kyrsten Sinema and Mark Kelly will be critical voices and votes in the upcoming infrastructure debate,” Drew Maloney, the president and CEO of the American Investment Council, wrote in an op-ed published by an Arizona news outlet. The trade group represents some of the world’s largest private equity firms, including Blackstone, Apollo Global Management, Carlyle Group and KKR. “I urge them to continue supporting private investment’s role in helping small businesses here in Arizona and across the country,” he added.

One of the group’s top priorities was then, and is now, to preserve “carried interest capital gains and prevent elimination of interest deductibility.”

“Our team worked to ensure that members of Congress from both sides of the aisle understand how private equity directly employs workers and supports small businesses throughout their communities,” Maloney said in a statement to CNBC. “Our advocacy helped prevent punitive tax increases that would make it harder for investors to continue to support jobs, small businesses, and pensions in every state.”

Sinema’s been fighting to help preserve the loophole since at least last year when she told Democratic leaders she opposed closing the carried interest tax break. It was subsequently stripped out of a House bill, according to NBC News.

Sinema’s opposition, along with a bevy of concerns from Sen. Joe Manchin, DW.V., helped sink a much more sprawling version of the bill, which was significantly back to win over the two moderate Democrats.

‘What’s best for Arizona’

“Senator Sinema makes every decision based on one criteria: what’s best for Arizona,” Sinema’s spokeswoman Hannah Hurley told CNBC in an email. She said Sinema has been clear for over a year that she will only support tax reforms and revenue options that support Arizona’s economic growth and competitiveness. Sinema believes that “disincentivizing” investments in Arizona businesses would hurt the state’s economy and ability to create jobs, Hurley said.

In the weeks before Sunday’s vote, Sinema’s office was inundated with calls from lobbyists representing hedge funds, private equity firms and other money managers arguing against closing the carried interest tax loophole, according to people familiar with the matter. In the runup to last week’s deal, Ella’s senator and her staff fielded numerous in-person meetings with the industry, said some of the people familiar with these meetings, asking not to be identified to speak freely about private efforts to connect with Sinema .

Since she was elected to the Senate in 2018, Sinema has been a sympathetic ear to the industry. Last September, she huddled for a lunch meeting at a Philadelphia restaurant with Michael Forman, who manages at least $34 billion as CEO of a Philly-based investment firm FS Investments, and one of his executives, according to people familiar with the lunch. Forman did not return emails and calls seeking comment.

“Every single major industry that is not supportive of what’s in there is meeting with Sinema and she is meeting with anybody and everybody,” a lobbyist representing some of the biggest investment firms in the world told CNBC before Schumer announced late Thursday that Democrats agreed to drop the carried interest provision to get her vote. Sinema said she would work separately “to enact carried interest tax reforms.”

Private equity donors

Even before Sinema was elected to the Senate in 2018, she supported private equity investors as a member in the House of Representatives. In 2016, Sinema said the industry provided “billions of dollars each year to Main Street businesses,” according to the New York Times.

Sinema won a coveted seat on the powerful Banking Committee and made quick work networking with — and raising donations from — the industry she would oversee. Since the start of the 2018 election cycle, she’s raked in at least $2 million from the securities and investment industry — outraising Senate Banking Chairman Sherrod Brown’s $770,000 in industry donations over the same time, according to Federal Election Commission data analyzed by the nonpartisan campaign finance watchdog OpenSecrets. Both Sinema and Brown, D-Ohio, are up for reelection in 2024.

Sinema’s take includes $10,000 in campaign donations from the American Investment Council’s political action committee, half of which was donated to her campaign after Maloney’s op-ed ran last year.

Employees at private equity firms Kohlberg Kravis Roberts, the Carlyle Group and Apollo Global Management donated more than $95,000, combined, to Sinema from the 2018 election through the current 2022 election cycle, according to campaign finance data.

That includes $11,600 in combined donations from KKR co-founders Henry Kravis and George Roberts, according to Federal Election Commission filings. Records show that Carlyle’s and Apollo’s political action committees also donated a combined $15,000 to Sinema’s reelection campaign.

Representatives for KKR and Carlyle declined to comment. Representatives for Apollo and Blackstone did not return requests for comment.

‘Hats off to the P/E lobby!’

The reason why some of Wall Street’s wealthiest money managers want to preserve the carried interest loophole is because it taxes their profits at a lower rate than the ordinary income. Instead of paying the standard individual income tax rates of up to 37% for individuals who earn more than $539,900 ($647,850 for married couples filing jointly), carried interest is taxed at the capital gains rate, which is usually around 20% for high-income earners, as long as the investment is held for at least three years.

Democrats wanted to make executives hold those investments for at least five years to get the better rate. The industry defends the carried interest tax break, saying it helps preserve investments that benefit small businesses. Critics say it’s just a massive tax break for the rich.

Lloyd Blankfein, the former CEO of Wall Street investment bank Goldman Sachs, mockingly congratulated the private equity industry on Twitter after the carried interest provision was stripped from the Inflation Reduction Act: “Hats off to the P/E lobby! After all these years and budget crises, the highest paid people still pay the lower capital gains tax on earnings from their labor.”

.

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US

Senate Dems skipping COVID testing to push spending bill vote: report

That’s sick!

Senate Democrats are embracing a “Don’t Test, Don’t Tell” policy this weekend as they try to ram a $764 billion spending bill through the 50-50 chamber — knowing that even one COVID-19 positive could blow up their plans.

Senate Majority Leader Chuck Schumer (D-NY) has set a Saturday test vote for the so-called Inflation Reduction Act, which needs all 50 Democrats on board so Vice President Kamala Harris can cast a tiebreaking vote in its favor.

“They’re not going to delay it if a member has gotten COVID,” a senior Senate aide told Puck News. “Counterparts are saying they’re not going to test anymore. It’s not an official mandate but we all know we’re not letting COVID get in the way. The deal is happening. Less testing, just wear masks and get it done.”

Another source told the outlet that even if a senator did catch the virus, “you can bring your ventilator and still vote.”

Unlike the House, the Senate does not allow proxy voting, meaning members who cannot make it to the floor due to illness are out of luck.

Senate Majority Leader Chuck Schumer set a test vote on Saturday for the Inflation Reduction Act.
Senate Majority Leader Chuck Schumer set a test vote on Saturday for the Inflation Reduction Act.
AP Photo/Mariam Zuhaib

Earlier in the week – before moderate Sen. Kyrsten Sinema (D-Ariz.) got on board with Schumer and Sen. Joe Manchin’s (D-WV) climate and energy plan – the Democratic leader insisted his party was “going to stay healthy” ahead of a potential vote.

“We’re not talking about a plan B,” Schumer said at the time.

Concerns about having all 50 Democrats and Democrat-voting Independents present on the Senate floor have grown in recent weeks, as several senators have tested positive for COVID or been absent for other health reasons.

In late June, Senate President Pro Tempore Patrick Leahy (D-Vt.) fell in his Virginia home and broke his hip – keeping him out of Washington until this week. He ultimately underwent two surgeries.

Sen.  Kyrsten Sinema agreed to a compromise for the spending plan — likely giving Democrats 50 votes for the bill in the Senate.
Sen. Kyrsten Sinema agreed to a compromise for the spending plan — likely giving Democrats 50 votes for the bill in the Senate.
AP Photo/J. Scott ApplewhiteFile

Just a week before, Republican Sen. Kevin Cramer of North Dakota seriously injured his hand during a yard work incident.

In early July, Schumer and Sen. Richard Blumenthal (D-Conn.) tested positive for COVID-19, both reporting mild symptoms. Days later, Manchin and Republican Sen. Lisa Murkowski of Alaska also reported positive tests.

Ironically, Schumer accused Senate Republicans of not taking COVID-19 seriously in the fall of 2020, when a spate of positive tests threatened to derail the confirmation of Supreme Court Justice Amy Coney Barrett.

“Every Senator and relevant staff must have negative tests on two consecutive days and have completed the appropriate quarantining period, and there should be mandatory testing every day of the [confirmation] hearing,” Schumer said in a statement on Oct. 5 of that year. “Testing must be administered by an independent entity, such as the Attending Physician of the United States Congress. Failure to implement a thorough testing approach would be intentionally reckless, and could reasonably lead some wonder if Chairman [Lindsey] Graham and Leader [Mitch] McConnell may not want to know the results.”

If the bill clears the planned Saturday test vote, a series of debates and votes on Republican amendments is expected to follow before a potential vote on final passage sometime Sunday. The legislation would then go to the House.

Sinema agreed to support the measure on Thursday after a provision taxing profits earned by hedge fund, venture capital and private equity executives known as carried interest was removed. In exchange, a 1% tax on corporate stock buybacks was added.

Despite its name, several economic experts — and even the White House — have suggested the Inflation Reduction Act would have little impact on the historic price spikes being felt across the country.

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Sanders rips Inflation Reduction Act, says it will have ‘minimal impact on inflation’

Sen. Bernie Sanders (I-Vt.) ripped the Inflation Reduction Act Saturday for doing little to fight inflation and not enough to help Americans struggling to afford health care, child care and housing.

“According to the [Congressional Budget Office] and other economic organizations that have studied this bill, it will have a minimal impact on inflation,” Sanders declared on the Senate floor to open debate on the 755-page bill, which will raise taxes on corporations, fight climate change and reduce some prescription drug costs.

The line of criticism echoed what Senate Republicans have said for days in pointing to a Penn Wharton analysis concluding the bill will have a negligible impact on inflation.

Sanders argued the Democratic bill falls far short of what is needed when Americans are growing increasingly disillusioned with government and a tiny fraction of wealthy individuals and families own a hugely disproportionate share of the nation’s wealth.

He pointed to the lower standard of living many younger people know and expect compared to their parents’ generation, the daunting cost of housing for people starting out in the work world and the stagnation of wages.

“This legislation does not address any of their needs,” Sanders said. “This legislation does not address the reality that we have more income and wealth inequality today than at any time in the last hundred years.”

He complained the bill doesn’t address the fact that CEOs of major corporations make 350 times as much as their workers, or do more to improve a health care system.

“This bill does nothing to address the systemic dysfunctionality of the American health care system,” he charged.

He also noted the bill “as currently written does nothing” to address the nation’s rate of childhood poverty, a pointed reference to Sen. Joe Manchin’s (DW.Va.) opposition to including an extension of the expanded child tax credit — which expired at the end of last year — in the bill.

He said the bill also fails to address the nation’s affordable housing crisis.

“Yup, you guessed it. This bill does nothing to address the major housing crisis that we face or build one unit of safe and affordable housing. Just another issue that we push aside,” he grumbled.

But Sanders’s biggest complaint is legislation doesn’t give Medicare enough authority to negotiate lower prescription drug prices.

He said “the good news” is the bill would allow Medicare to negotiate prescription drug prices with the pharmaceutical industry but the “bad news” is the provision does not go into effect for four years, at which time only 10 drugs will be covered.

“This provision will have no impact on the prices for Americans not on Medicare. Those prices will continue to rise uncontrollably,” he said.

Sanders announced he will offer an amendment that would require Medicare to pay no more for prescription drugs than the Department of Veterans Affairs.

He said that proposal would save Medicare $900 billion over the next decade.

In a floor speech Wednesday, he said he would use that money to lower the Medicare eligibility age to 60 and extend Medicare benefits to cover vision, hearing and dental care.

Sanders told reporters earlier Saturday that he plans to offer three other amendments to the bill related to prescription drugs and Medicare.

One amendment would expand Medicare to provide dental, vision and hearing benefits, another would provide $30 billion to establish a Civilian Conservation Corps to combat climate change, and a fourth would expand the $300 per month Child Tax Credit for the next five years.

His arguments, however, are largely falling flat with Democratic senators who say they won’t vote for any amendments that could jeopardize the support of Manchin and fellow centrist Sen. Kyrsten Sinema (D-Ariz.).

A Democratic senator said Schumer has urged colleagues not to offer amendments to the bill that could upset the carefully crafted compromise he reached with Manchin and Sinema after weeks of negotiation.

One Democratic aid said Sanders’s insistence on voting on his amendments would delay final passage of the bill.

But Schumer has limited leverage over Sanders, who as chairman of the Budget Committee, has the official role of managing the floor debate on the bill, which is being moved under special budgetary reconciliation rules to circumvent a GOP filibuster.

Senate Finance Committee Chairman Ron Wyden (D-Ore.), who played a major role in crafting the prescription drug compromise with Sinema, pushed back against Sanders’s criticism.

He hailed it as a major victory because it would set an important precedent of empowering the government to negotiate with the pharmaceutical industry.

“I think there is a reason big PhRMA is fighting this so hard. They know once you put negotiation into law, embedded into law, there will be no turning back. That’s what this all about,” he said, he referring to the pharmaceutical industry’s trade association. “This is a seismic shift between government and this lobby.”

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US

Sanders rips Inflation Reduction Act, says it will have ‘minimal impact on inflation’

Sen. Bernie Sanders (I-Vt.) ripped the Inflation Reduction Act Saturday for doing little to fight inflation and not enough to help Americans struggling to afford health care, child care and housing.

“According to the [Congressional Budget Office] and other economic organizations that have studied this bill, it will have a minimal impact on inflation,” Sanders declared on the Senate floor to open debate on the 755-page bill, which will raise taxes on corporations, fight climate change and reduce some prescription drug costs.

The line of criticism echoed what Senate Republicans have said for days in pointing to a Penn Wharton analysis concluding the bill will have a negligible impact on inflation.

Sanders argued the Democratic bill falls far short of what is needed when Americans are growing increasingly disillusioned with government and a tiny fraction of wealthy individuals and families own a hugely disproportionate share of the nation’s wealth.

He pointed to the lower standard of living many younger people know and expect compared to their parents’ generation, the daunting cost of housing for people starting out in the work world and the stagnation of wages.

“This legislation does not address any of their needs,” Sanders said. “This legislation does not address the reality that we have more income and wealth inequality today than at any time in the last hundred years.”

He complained the bill doesn’t address the fact that CEOs of major corporations make 350 times as much as their workers, or do more to improve a health care system.

“This bill does nothing to address the systemic dysfunctionality of the American health care system,” he charged.

He also noted the bill “as currently written does nothing” to address the nation’s rate of childhood poverty, a pointed reference to Sen. Joe Manchin’s (DW.Va.) opposition to including an extension of the expanded child tax credit — which expired at the end of last year — in the bill.

He said the bill also fails to address the nation’s affordable housing crisis.

“Yup, you guessed it. This bill does nothing to address the major housing crisis that we face or build one unit of safe and affordable housing. Just another issue that we push aside,” he grumbled.

But Sanders’s biggest complaint is legislation doesn’t give Medicare enough authority to negotiate lower prescription drug prices.

He said “the good news” is the bill would allow Medicare to negotiate prescription drug prices with the pharmaceutical industry but the “bad news” is the provision does not go into effect for four years, at which time only 10 drugs will be covered.

“This provision will have no impact on the prices for Americans not on Medicare. Those prices will continue to rise uncontrollably,” he said.

Sanders announced he will offer an amendment that would require Medicare to pay no more for prescription drugs than the Department of Veterans Affairs.

He said that proposal would save Medicare $900 billion over the next decade.

In a floor speech Wednesday, he said he would use that money to lower the Medicare eligibility age to 60 and extend Medicare benefits to cover vision, hearing and dental care.

Sanders told reporters earlier Saturday that he plans to offer three other amendments to the bill related to prescription drugs and Medicare.

One amendment would expand Medicare to provide dental, vision and hearing benefits, another would provide $30 billion to establish a Civilian Conservation Corps to combat climate change, and a fourth would expand the $300 per month Child Tax Credit for the next five years.

His arguments, however, are largely falling flat with Democratic senators who say they won’t vote for any amendments that could jeopardize the support of Manchin and fellow centrist Sen. Kyrsten Sinema (D-Ariz.).

A Democratic senator said Schumer has urged colleagues not to offer amendments to the bill that could upset the carefully crafted compromise he reached with Manchin and Sinema after weeks of negotiation.

One Democratic aid said Sanders’s insistence on voting on his amendments would delay final passage of the bill.

But Schumer has limited leverage over Sanders, who as chairman of the Budget Committee, has the official role of managing the floor debate on the bill, which is being moved under special budgetary reconciliation rules to circumvent a GOP filibuster.

Senate Finance Committee Chairman Ron Wyden (D-Ore.), who played a major role in crafting the prescription drug compromise with Sinema, pushed back against Sanders’s criticism.

He hailed it as a major victory because it would set an important precedent of empowering the government to negotiate with the pharmaceutical industry.

“I think there is a reason big PhRMA is fighting this so hard. They know once you put negotiation into law, embedded into law, there will be no turning back. That’s what this all about,” he said, he referring to the pharmaceutical industry’s trade association. “This is a seismic shift between government and this lobby.”

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Sinema gives her nod, and influence, to Democrats’ big bill

WASHINGTON (AP) — Sen. Joe Manchin sealed the deal reviving President Joe Biden’s big economic, health care and climate bill. But it was another Democratic senator, Kyrsten Sinema of Arizonawho intently, quietly and deliberately shaped the final product.

Democrats pushed ahead Friday on an estimated $730 billion package that in many ways reflects Sinema’s priorities and handiwork more than the other political figures who have played a key role in delivering on Biden’s signature domestic policy agenda.

It was Sinema early on who rejected Biden’s plan to raise the corporate tax rate from 21% to 28%, as she broke with the party’s primary goal of reversing the Trump-era tax break Republicans gave to corporate America.

Sinema also scaled back her party’s long-running plan to allow Medicare to negotiate lower drug prices with the pharmaceutical companies as a way to reduce overall costs to the government and consumers. She limited which drugs can be negotiated.

Her insistence on climate change provisions forced the coal-state Manchin to stay at the table to accept some $369 billion in renewable energy investments and tax breaks. She also is tucking in more money to fight Western droughts.

And it was Sinema who in one final stroke gave her blessing to the deal by extracting an ultimate demand — she forced Democrats to drop plans to close a tax loophole that benefits wealthy hedge fund managers and high-income earners, long a party priority. Instead, the final bill will keep the tax rate at 20% instead of hiking it to the typical 37%.

“Kyrsten Sinema’s proven herself to be a very effective legislator,” said Sen. Mark Warner, D-Va., who has negotiated extensively with his colleague over the past year, including on the tax loophole.

In a 50-50 Senate where every vote matters, the often inscrutable and politically undefinable Sinema puts hers to use in powerful ways. Her negotiating at the highest levels of power — she appears to have equal access to Biden, Senate Majority Leader Chuck Schumer and even Senate Republican leader Mitch McConnell — has infuriated some, wowed others and left no doubt she is a powerful new political figure.

While other lawmakers bristle at the influence a single senator can wield in Congress, where each member represents thousands if not millions of voters, Sinema’s nod of approval late Thursday was the last hurdle Democrats needed to push the Inflation Reduction Act forward. A final round of grueling votes on the package is expected to begin this weekend.

“We had no choice,” Schumer told reporters Friday at the Capitol.

Getting what you want in Congress does not come without political costs, and Sinema is amassing a balance due.

Progressives are outraged at their behavior, which they view as beyond the norms of sausage-making during the legislative process and verging on an unsettling restacking of party priorities to a more centrist, if not conservative, lane.

Progressive Rep. Ruben Gallego is openly musing about challenging Sinema in the 2024 primary in Arizona, and an independent expenditure group, Change for Arizona 2024, says it will support grassroots organizations committed to defeating her in a Democratic primary.

“The new reconciliation bill will lower the cost of prescription drugs,” Gallego wrote on Twitter last weekend. “@SenatorSinema is holding it up to try to protect ultra rich hedge fund managers so they can pay a lower tax.”

In fact, on the left and the right, commentators lambasted her final act—saving the tax breaks for the wealthy. Some pointed to past legislative luminaries—the late Sen. Robert Byrd, for example, used his clout to leave his name on roads, buildings and civic institutions across the West Virginia hillsides. They scoff at Sinema establishing her legacy of her in such a way.

“Astonishing,” wrote conservative Hugh Hewitt on Twitter. “@SenatorSinema could have demanded anything she wanted — anything that spent money or changed taxes — and with that leverage for Arizona she choose … to protect the carry interest exemption for investors. …Not the border. Not the country. A tax break. wow.”

Democratic former Clinton-era Labor Secretary Robert Reich wrote, “The ‘carried interest’ loophole for billionaire hedge-fund and private-equity partners is now out of the Inflation Reduction Act, courtesy of Kyrsten Sinema.

“She’s up in 2024. Primary her and get her out of the Senate.”

But Sinema has never cared much about what others say about her, from the time she set foot in the Senate, breaking the rules with her whimsical fashion choices and her willingness to reach across the aisle to Republicans — literally joining them at times in the private Senate GOP cloakroom.

The Arizona senator seeks to emulate the maverick career of John McCain, drawing on his farewell address for her maiden Senate speech, and trying to adopt his renegade style alongside her own — a comparison that draws some eyerolls for its reach and scope.

Still, in her short time in the Senate, Sinema has come herself to be a serious study who understands intricacies of legislation and a hard-driving dealer who does not flinch. She has been instrumental in landmark legislation, including the bipartisan infrastructure bill Biden signed into law last summer.

“There’s not been a bipartisan group that she’s not been a part of,” Warner said.

In the end, the final package is slimmer than Biden first envisioned with his lofty Build Back Better initiative, but still a monumental undertaking and a bookend to a surprisingly productive if messy legislative session.

The bill would make health care gains for many Americans, capping pharmacy costs for seniors at $2,000 out of pocket and providing subsidies to help millions of people who buy health insurance on the private market. It includes what the Biden administration calls the largest investment in climate change ever, with money for renewable energy and consumer rebates for new and used electric cars. It would mostly be paid for by higher corporate taxes, with some $300 billion going to deficit reductions.

On the climate provisions, a priority for Democrats, Sinema may have played a role in keeping the sweeping provisions in the bill, when Manchin was less inclined to do so.

Environmental leaders, who have been involved in talks on the bill since last year, said Sinema has helped shape the bill all along. She was especially helpful last year when she made it clear she supports the climate and energy provisions, and her commitment to climate issues has remained steadfast, environmentalists said.

She tacked on her own priority, money to help Western states dealing with droughts, in the final push.

Jamal Raad, executive director of Evergreen Action, an environmental group that has pushed for the climate bill, said: “Senator Sinema needed money for drought relief to help her constituents stave off the worst effects of climate change. If that’s what was needed to gain her support from her, then good on her.

At home in Arizona, business allies that have been crucial to Sinema’s efforts to build an independent image have cheered on her willingness to resist party pressure over the tax increases.

The Arizona Chamber of Commerce and Industry and the National Association of Manufacturers ran ads against the deal, though they didn’t target Sinema by name, and bent her ear in a phone call this week.

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Associated Press writers Matthew Daly in Washington and JJ Cooper in Phoenix contributed to this article.

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Sinema made Schumer cut carried interest piece of reconciliation bill

US Senate Majority Leader Chuck Schumer (D-NY) holds his weekly news conference after the Democratic caucus party luncheon at the US Capitol in Washington, August 2, 2022.

Jonathan Ernst | Reuters

Senate Majority Leader Chuck Schumer said Friday that Democrats had “no choice” but to drop a key tax provision from their major spending bill in order to gain Sen. Kyrsten Sinema’s support.

Sinema, a centrist Democrat from Arizona, had held her support of the Inflation Reduction Act, the sweeping bill that includes much of the Biden administration’s tax, climate and health care agenda. Senate Democrats need her support from her to pass the bill through the Senate on a party-line vote using the budget reconciliation process, which requires a simple majority vote. The chamber is split 50-50 between Democrats and Republicans.

Sinema announced Thursday night that she would indeed back the legislation, following an agreement “to remove 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 both Democrats and Republicans — including former President Donald Trump — have tried to close.

Carried interest refers to compensation that hedge fund managers and private equity executives receive from their firms’ investment gains. After three years, that money is taxed at a long-term capital gains rate of 20%, instead of a short-term capital gains rate, which tops out at 37%.

The Inflation Reduction Act aimed to narrow 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 in this bill,” Schumer, DN.Y., said of the proposal to narrow the loophole.

But “Senator Sinema said she would not vote for the bill, not even move to proceed unless we took it out,” he said. “So we had no choice.”

Sinema stressed Thursday night that after the reconciliation bill passes, “I look forward to working with [Sen. Mark Warner, D-Va.] to enact carried interest tax reforms, protecting investments in America’s economy and encouraging continued growth while closing the most egregious loopholes that some abuse to avoid paying taxes.”

A spokeswoman for Sinema defended the senator’s record when asked by CNBC on Friday about Schumer’s remarks and her stance on carried interest.

Sinema “has been clear and consistent for over a year that she 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, disincentivizing investments in Arizona businesses would hurt Arizona’s economy and ability to create jobs.”

Schumer said that another tax piece from the Inflation Reduction Act was taken out in order to secure the deal with Sinema. This one came from a proposal to impose a 15% corporate alternative minimum tax aimed at rich corporations that are accused of skirting their tax obligations. It was projected to raise $313 billion — more than 40% of the bill’s revenue.

While that part of the bill was altered, “$258 billion of that remains, so the vast majority remains,” Schumer said.

And while the carried interest provision was nixed, Schumer said Democrats added in an excise tax on stock buybacks that will bring in $74 billion. He said that multiple legislators are “excited” about that update.

“I hate stock buybacks. I think they’re one of the most self-serving things corporate America does,” Schumer said. “I’d like to abolish them.”

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Sinema made Schumer cut carried interest loophole from reconciliation bill

US Senate Majority Leader Chuck Schumer (D-NY) holds his weekly news conference after the Democratic caucus party luncheon at the US Capitol in Washington, August 2, 2022.

Jonathan Ernst | Reuters

Senate Majority Leader Chuck Schumer said Friday that Democrats had “no choice” but to drop a key tax provision from their major spending bill in order to gain Sen. Kyrsten Sinema’s support.

Sinema, a centrist Democrat from Arizona, had held her support of the Inflation Reduction Act, the sweeping bill that includes much of the Biden administration’s tax, climate and health care agenda. Senate Democrats need her support from her to pass 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 by party.

Sinema announced Thursday night that she would indeed back the legislation, following an agreement “to remove 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 both Republicans and Democrats — including former President Donald Trump — have tried to close.

Carried interest refers to compensation that hedge fund managers and private equity executives receive from their firms’ investment gains. After three years, that money is taxed at a long-term capital gains rate of 20%, instead of a short-term capital gains rate, which tops out at 37%.

The Inflation Reduction Act aimed to narrow 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 in this bill,” Schumer, DN.Y., said of the proposal to narrow the loophole.

But “Senator Sinema said she would not vote for the bill, not even move to proceed unless we took it out,” he said. “So we had no choice.”

Sinema stressed Thursday night that after the reconciliation bill passes, “I look forward to working with [Sen. Mark Warner, D-Va.] to enact carried interest tax reforms, protecting investments in America’s economy and encouraging continued growth while closing the most egregious loopholes that some abuse to avoid paying taxes.”

A spokeswoman for Sinema defended the senator’s record when asked by CNBC on Friday about Schumer’s remarks and her stance on carried interest.

Sinema “has been clear and consistent for over a year that she 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, disincentivizing investments in Arizona businesses would hurt Arizona’s economy and ability to create jobs.”

Schumer said that another tax piece from the Inflation Reduction Act was taken out in order to secure the deal with Sinema. This one came from a proposal to impose a 15% corporate alternative minimum tax aimed at rich corporations that are accused of skirting their tax obligations. It was projected to raise $313 billion — more than 40% of the bill’s revenue.

While that part of the bill was altered, “$258 billion of that remains, so the vast majority remains,” Schumer said.

And while the carried interest provision was nixed, Schumer said Democrats added in an excise tax on stock buybacks that will bring in $74 billion. He said that multiple legislators he spoke with are “excited” about that update.

“I hate stock buybacks. I think they’re one of the most self serving things corporate America does,” Schumer said. “I’d like to abolish them.”

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US

Democrats say they’ve reached agreement on economic package

WASHINGTON (AP) — Senate Democrats have agreed to eleventh-hour changes to their marquee economic legislation, they announced late Thursday, clearing the major impediment to pushing one of President Joe Biden’s paramount election-year priorities through the chamber in coming days.

Sen. Kyrsten Sinema, D-Ariz., a centrist seen as the pivotal vote in the 50-50 chamber, said in a statement that she had agreed to revamp some of the measure’s tax and energy provisions and was ready to “move forward” on the bill.

Senate Majority Leader Chuck Schumer, DN.Y., said he believed his party’s energy, environment, health and tax compromise “will receive the support of the entire” Democratic membership of the chamber. His party needs unanimity and Vice President Kamala Harris’ tie-breaking vote to move the measure through the Senate over certain solid opposition from Republicans, who say the plan’s tax increases and spending would worsen inflation and damage the economy.

The announcement came as a surprise, with some expecting talks between Schumer and the mercurial Sinema to drag on for days longer without guarantee of success. Schumer has said he wants the Senate to begin voting on the legislation Saturday, after which it would begin its summer recess. Passage by the House, which Democrats control narrowly, could come when that chamber returns briefly to Washington next week.

Democrats revealed few details of their compromise, and other hurdles remained. Still, final congressional approval would complete an astounding resurrection of Biden’s wide-ranging domestic goalsthough in a more modest way.

Democratic infighting had embarrassed Biden and forced him to stop down a far larger and more ambitious $3.5 trillion, 10-year version, and then a $2 trillion alternative, leaving the effort all but dead. Instead, Schumer and Sen. Joe Manchin, the conservative maverick Democrat from West Virginia who derailed Biden’s earlier efforts, unexpectedly negotiated the slimmer package two weeks ago.

Its approval would let Democrats appeal to voters by boasting they are moving to reduce inflation — though analysts say that impact would be minor — address climate change and increase US energy security.

“Tonight, we’ve taken another critical step toward reducing inflation and the cost of living for America’s families,” Biden said in a statement.

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.

Schumer said the measure retained the bill’s language on prescription drug pricing, climate change, “closing tax loopholes exploited by big corporations and the wealthy” and reducing federal deficits.

He said the bill “addressed a number of important issues” that Democratic senators raised during talks. He said the final measure “will reflect this work and put us one step closer to enacting this historic legislation into law.”

Left unclear was whether changes had been made to the bill’s 15% minimum corporate tax, a provision Sinema has been interested in revising. It would raise an estimated $313 billion, making it the legislation’s largest revenue raiser.

That levy, which would apply to around 150 corporations with income exceeding $1 billion, has been strongly opposed by business, including by groups from Sinema’s Arizona.

The final measure was expected to include assistance that Sinema and other Western senators have been trying to add to help their states cope with epic drought and wildfires that have become commonplace. Those lawmakers have been seeking around $5 billion but it was unclear what the final language would do, said a Democrat following the bargaining who would describe the effort only on condition of anonymity.

The measure will also have to withstand a “vote-a-rama,” a torrent of nonstop amendments expected to last well into the weekend, if not beyond. Republicans want to kill as much of the bill as possible, either with the parliamentarian’s rulings or amendments.

Even if their amendments lose — as is certain for most — Republicans will consider it mission accomplished if they force Democrats to take risky campaign-season votes on touchy issues like taxes, inflation and immigration.

Democratic amendments are expected as well. Progressive Sen. Bernie Sanders, I-Vt., has said he wants to make his health care provisions stronger.

The overall bill would raise $739 billion in revenue. That would come from tax boosts on high earners and some huge corporations, beefed-up IRS tax collections and curbs on drug prices, which would save money for the government and patients.

It would spend much of that on initiatives helping clean energy, fossil fuels and health care, including helping some people buy private health insurance. That would still leave over $300 billion in the measure for deficit reduction.

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Democrat Sinema’s views on economic bill remain shrouded

WASHINGTON (AP) — Democratic Sen. Kyrsten Sinema’s views remained a mystery Monday as party leaders eyed votes later this week on their emerging economic legislation and both parties pointed to dueling studies they used to either laud or belittle the measure’s impact.

With Democrats needing all of their 50 votes for the energy and health care measure to move through the Senate, a Sinema spokesperson suggested the Arizona lawmaker would take her time revealing her decision. Hannah Hurley said Sinema was reviewing the bill and “will need to see what comes out of the parliamentarian process.” It could take days for the chamber’s rules umpire to decide whether the measure flouts procedural guidelines and needs changes.

Senate Majority Leader Chuck Schumer, DN.Y., and Sen. Joe Manchin, DW.Va., announced an agreement last week on legislation increasing taxes on huge corporations and wealthy individuals, bolstering fossil fuels and climate change efforts and curbing pharmaceutical prices. Overall, it would raise $739 billion over 10 years in revenue and spend $433 billion, leaving over $300 billion to modestly reduce federal deficits.

The legislation would give President Joe Biden a victory on his domestic agenda in the runup to this fall’s congressional elections. If Sinema demands changes, she would face enormous pressure to reach an accord with top Democrats and avoid a campaign-season defeat that would be a jarring blow to her party’s prospects in November.

Manchin is one of Congress’ most conservative and contrarian Democrats. He has spent over a year forcing his party to starkly trim his economic proposals, citing inflation fears, and his compromise with Schumer last week shocked colleagues who’d given up hope that he would agree to such a wide-ranging measure.

Sinema has played a lower-profile but similar role as Manchin — a lawmaker who can be unpredictable and willing to use the leverage all Democrats have in a 50-50 Senate. Last year, she lauded a proposal for a minimum tax on large corporations — which the new legislation has — but has also expressed opposition to increasing corporate or individual tax rates.

“She has a lot in this bill,” Manchin, citing her support for past efforts to rein prices for prescription drugs, told reporters Monday. He said she’s been “very adamant” about not increasing taxes, adding, “I feel the same way.”

Manchin has asserted the bill’s imposition of a 15% minimum tax on corporations earning over $1 billion annually is not a tax increase. He says it closes loopholes such companies use to escape paying the current 21% corporate tax.

Republicans mocked that reasoning and said its tax increases would weaken the economy and kill jobs. They cited a report from Congress’ nonpartisan Joint Committee on Taxation that said about half of the corporate minimum tax would hit manufacturing firms.

“So in the middle of a supply chain crisis, Democrats want huge job-killing tax hikes that will disproportionately crush American manufacturing and manufacturing jobs,” said Senate Minority Leader Mitch McConnell, R-Ky.

Biden has said he will not raise taxes on people earning under $400,000 annually. Manchin has said the Democratic package honors that pledge.

Republicans recently distributed another Joint Committee on Taxation analysis that said the measure would raise taxes on people earning below that figure. Democrats criticized the study as incomplete, saying it omitted the impact on middle-class families of the bill’s health insurance subsidies and clean energy tax cuts.

Democrats touted a report by Mark Zandi, chief economist at Moody’s Analytics. It said the measure “will nudge the economy and inflation in the right direction, while meaningfully addressing climate change and reducing the government’s budget deficits.”

Schumer said he expected votes to begin this week in the Senate, where Vice President Kamala Harris could cast the tie-breaking vote to assure its passage. The narrowly divided House has left town for an August recess, but Democratic leaders have said they would bring lawmakers back for a vote, perhaps next week.

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