In a statement, Sinema said Democrats had “agreed to remove” a key tax policy targeting wealthy investors that was intended to address what is known as the “carried interest loophole.” She also reported that they made additional changes to a second provision that imposes a new minimum tax on corporations that currently pay nothing to the US government.
This latest round of revisions should benefit some manufacturers, according to two people familiar with the matter, who spoke on condition of anonymity to describe the unreleased details. Many business leaders, including Arizona business leaders, had asked Sinema to review the impact of the tax in recent days.
With that, Democrats opted to seek a new 1% tax on corporate stock buybacks, a move that would offset at least some of the revenue that may have been lost as a result of the changes, the two people said. close to the file. And party lawmakers agreed to set aside new funds at Sinema’s request to address climate issues, including drought, the sources said.
From there, Sinema said she would wait for a final House Congressman review — a critical step in the process that allows Democrats to move their spending bill — at which point she would “advance” on the measure. known as the Cut Inflation Act of 2022. Biden hailed the development, describing it in a statement late Thursday as a “critical step toward reducing inflation and the cost of living for families.” American”.
“I look forward to the Senate passing this legislation and passing it into law as soon as possible,” the president said.
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The changes appear to have helped Democratic leaders thread a narrow needle, satisfying Sinema while preserving the focus of the deal Senate Majority Leader Charles E. Schumer (DN.Y.) struck with another moderate — Sen. Joe Manchin III (DW.Va.) — last week.
Sinema had not been a player in those talks, even though she is a key Democratic vote, sometimes skeptical of her own party’s fiscal and spending ambitions. Her public silence in recent days has fueled speculation that she may have had serious reservations about the new bill, a successor to the roughly $2 trillion Build Back Better Act that House Democrats passed l ‘last year. Even Republicans at one point sought to seize on the uncertainty, urging Sinema to oppose his own party.
In recent days, Manchin had remained steadfast in his support for the deal he struck, the original version of which was expected to generate more than $768 billion in revenue over the next decade. Any changes to appease Sinema threatened to cut the roughly $300 billion that should be available for deficit reduction, a major problem for Manchin.
Democrats did not offer a full new estimate of their revised tax policies Thursday night. In a statement, however, Schumer said he expected “to receive the support of the entire Senate Democratic conference.” And he said the bill would further reduce the deficit by $300 billion.
The deal allows the party to proceed on Schumer’s schedule, beginning debate on the measure with a vote as early as Saturday. To win, Sinema’s vote is crucial: Only by banding together can Democrats overcome Republican filibuster and pass their long-stalled economic measure using the process known as reconciliation.
Under the new plan, Democrats are now seeking to impose a new tax on the money companies spend to buy back their own stock, the two sources familiar with the matter said. Party lawmakers have long challenged the practices, saying they benefit the stock prices of big companies at the expense of workers and the economy as a whole.
By adding the new tax, Democrats also appeared to rethink their original plans to impose a minimum 15% tax on corporations. The exact details of the change are unclear, but Sinema said in a statement that its deal would “protect advanced manufacturing.”
And Democrats withdrew their proposal to target taxes that apply to managers of private equity and hedge funds, an attempt to close what’s been called the “carried interest loophole.”
Initially, the bill sought to change the way these investors are taxed on the fees their clients pay them, subjecting them to higher rates. But they scrapped their initial plans in response to Sinema, who said she would work with Sen. Mark R. Warner (D-Va.) to resolve the issue while “protecting investments in the U.S. economy” and closing “the most glaring loopholes that some abuse to avoid paying taxes.