Democrats reached a deal with Sen. Kyrsten Sinema (D-Ariz.) on Thursday, securing her commitment to vote for their climate and health care bill in exchange for making several changes to the legislation.
“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. Subject to the Parliamentarian’s review, I’ll move forward,” Sinema announced in a statement on Thursday.
Her support clears the way for the bill’s passage as soon as next week, handing President Joe Biden another major legislative victory ahead of the November midterm elections.
Sinema had objected to a provision in the bill that would have tightened a tax loophole associated with hedge fund managers and private equity executives. She also expressed concern about a 15% corporate minimum tax that’s included in the bill. Business groups had lobbied her heavily on both measures, arguing it would disincentivize business investment.
In her statement, Sinema said she planned to reform the investor tax provision, known as carried interest, after the bill is signed into law.
“Following this effort, I look forward to working with Senator [Mark] Warner 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.”
The bill will now include a new excise tax on stock buybacks that will generate more revenue than the carried interest provision did, according to a Democrat familiar with the agreement. Democratic lawmakers have long wanted to tax stock buybacks, a form of executive self-enrichment that exploded after Congress slashed corporate taxes in 2017.
The Inflation Reduction Act is substantially narrower than Biden’s initial “Build Back Better” proposal, which included paid leave, a monthly child allowance, affordable housing and free community college tuition.
Still, its passage would represent a huge victory for Democrats in the middle of the campaign season.
The bill would allow Medicare to negotiate with the pharmaceutical industry for lower prescription drug prices, a hugely popular policy change that Democrats have sought for years. It would also invest more than $300 billion in green energy grants and tax incentives, and ultimately save the government hundreds of billions by funding stricter Internal Revenue Service enforcement.
Democrats expect to begin voting on the bill on Saturday under the reconciliation process, which allows them to pass the legislation with a simple majority because of its effect on the budget.
“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,” Schumer said in a statement Thursday. “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.”