U.S. Senate Majority Leader Chuck Schumer (D-NY) holds a weekly news conference after the Democratic Caucus luncheon at the U.S. Capitol in Washington on August 2, 2022.
Jonathan Ernst | Reuters
Senate Majority Leader Chuck Schumer said Friday that Democrats “have no choice” but to remove a key tax provision from their main spending bill to gain the support of Sen. Kyrsten Sinema.
Sinema, a centrist Democrat from Arizona, declined to support the Inflation Reduction Act, a sweeping bill that includes much of the Biden administration’s tax, climate and health care agenda. Senate Democrats need her support to use the budget reconciliation process to vote the bill partisanally in the Senate — which requires a simple majority of 50-50 in the Senate.
Sinema announced late Thursday that she would indeed support the legislation after a deal was reached to “remove the attached interest tax clause.”
She was referring to the language contained in the bill that would close the so-called spin-off loophole, a feature of tax law, Republicans Democrats, including former President Donald Trump, have tried to shut down.
Carried interest refers to the compensation that hedge fund managers and private equity executives receive from the investment income of their companies. After three years, the money will be taxed at a long-term capital gains rate of 20%, rather than short-term capital gains of up to 37%.
The Inflation Reduction Act aims to close that loophole by extending the short-term tax rate to five years. The bill’s provisions are expected to raise $14 billion over 10 years.
“I pushed for it to be in this bill,” DN.Y.’s Schumer said of the proposal to close the loophole.
But “Senema Sinema said she’s not going to vote for the bill or even take action until we get it out,” he said. “So we have no choice.”
Sinema stressed late Thursday that after the settlement bill passed, “I look forward to working with [Sen. Mark Warner, D-Va.] Implement carried interest tax reform to protect investment in the U.S. economy and encourage continued growth, while closing the worst loopholes that some abuse tax avoidance. “
On Friday, a Sinema spokeswoman defended the senator’s record when CNBC asked about Schumer’s remarks and her stance on spinoffs.
Sinema “has been clear for more than a year that she will only support tax reform and income options that support Arizona’s economic growth and competitiveness,” the spokeswoman said. “Amid record inflation, rising interest rates and economic growth In a slowdown scenario, inhibiting investment in Arizona businesses will hurt Arizona’s economy and ability to create jobs.”
Another tax was taken out of the Inflation Reduction Act to secure the deal with Sinema, Schumer said.This one comes from a proposal The 15% corporate alternative minimum tax targets wealthy businesses accused of evading their tax obligations. It is expected to raise $313 billion — more than 40 percent of the bill’s revenue.
Schumer said that while this part of the bill was amended, “$258 billion of it still exists, so the vast majority still exists,” Schumer said.
While the carried interest clause was eliminated, Schumer said Democrats imposed a sales tax on share buybacks, which would bring in $74 billion. He said multiple lawmakers he spoke with were “excited” by the update.
“I hate stock buybacks. I think it’s one of the most selfish things corporate America has ever done,” Schumer said. “I want to abolish them.”