In a statement, Sinema said it had won several changes to the package’s tax provisions, including eliminating the tax on carried interest, which would have affected hedge fund managers and private equity. That proposal would have raised $14 billion.
“We agreed to eliminate the carried interest tax provision, protect advanced manufacturing and promote our clean energy economy in the Senate’s budget reconciliation legislation,” Sinema said. “Depending on the parliamentarian’s review, I will go ahead.”
Sinema’s support is crucial, given that all 50 Republicans will oppose a plan they say will hurt the economy and cost far more than Democrats are fighting — so any Democratic defections could drowned it.
As CNN previously reported, Democrats agreed to add an excise tax on company stock buybacks as part of the deal.
“The deal will include a new excise tax on stock buybacks that brings in much more revenue than carried interest, meaning the deficit reduction figure will remain at $300 billion,” a Democrat familiar with the deal told CNN.
The $300 billion deficit reduction goal was a key priority of Sen. Joe Manchin, whose agreement to the deal last week revived the legislation.
“The agreement preserves key components of the Inflation Reduction Act, including reducing prescription drug costs, fighting climate change, closing tax loopholes used by large corporations and the wealthy, and reducing the deficit by $300 billion,” said Senate Majority Leader Chuck Schumer in a statement. “The final version of the reconciliation bill to be introduced on Saturday will reflect this work and bring us one step closer to passing this historic legislation into law.”
High stakes negotiations
Earlier Thursday, top Senate Democrats engaged in high-stakes negotiations with Sinema, actively discussing potential changes to key tax components to secure the support of Arizona moderates.
In private discussions, Sinema expressed concern about key parts of the Democrats’ plan to pay for their climate and health care package – imposing a 15% minimum tax on large corporations and taxing so-called carried interest, which would mean imposing a new tax on executives of hedge funds and private equity.
As a result, Democrats have struggled to find new sources of revenue to meet the goal of saving $300 billion over a decade.
“Failure is not an option,” Sen. Richard Blumenthal, D-Connecticut, said, echoing the view of much of his caucus earlier Thursday that Sinema would eventually join.
Schumer announced earlier Thursday that the Senate would reconvene on Saturday and planned to hold the first procedural vote to move on the bill. If the vote gets the support of all 50 members of the Democratic caucus, there will be up to 20 hours of debate. After debate time, there will be a process known colloquially on Capitol Hill as “vote-a-rama,” which is the marathon series of votes on amendments without a time limit before the final vote. If the bill ultimately passes, the House will have to act. Democrats are trying to wrap up negotiations and push through their economic endorsement before they leave town for a month-long vacation in August. The bill still needs to be approved by the parliamentarian in the Senate to move on to the rules related to reconciliation, which would allow the legislation to pass with a simple majority.
It is unclear when Parliamentarian Elizabeth McDonough will announce her decision on the package. A Democratic aide told CNN that the Senate Finance Committee’s energy provisions — most notably the clean energy credits — should be brought before the Senate panel on Friday.
Schumer announced a deal with Manchin last week that contains a number of key goals for the party on health care spending, taxes and tackling the climate crisis. The measure would invest $369 billion in energy and climate change programs with the goal of reducing carbon emissions by 40% by 2030. For the first time, Medicare would be empowered to negotiate the prices of certain drugs and would cap out-of-pocket costs at $2,000 for those enrolled in Medicare drug plans. It would also extend the Affordable Care Act’s expiring enhanced coverage subsidies for three years.
It is unclear whether all of these provisions will survive the parliamentarian’s review.
Strong pressure on Sinema
Sinema was not part of the deal, it learned of when the news broke last week. She declined to comment publicly on the deal, with aides saying only that she would wait for the parliamentarian’s Senate review before taking a position. Still, she made her demands clear to Democratic leaders, including wanting to add $5 billion to help the Southwest deal with its years-long drought, according to multiple sources.
While Democrats courted her, Republicans and business groups voiced their concerns. In a private conversation this week, the Arizona Chamber of Commerce and the National Association of Manufacturers urged Sinema to push for a change in the corporate minimum tax. Arizona Business Group President Danny Seiden told CNN he voiced the business community’s opposition to the 15 percent tax provision, noting it would especially hit manufacturers who benefit from an accelerated depreciation tax deduction that lowers their tax burden .
“Is that poorly written?” Sinema asked, according to Seidon, president of the Arizona Chamber of Commerce, who relayed the call to CNN.
“It gave me hope that she was willing to open this up and maybe make it better,” Seidon said.
Two sources told CNN that Sinema has privately raised those concerns with top Democrats, saying it would hurt manufacturers, including in her state.
At issue are changes proposed by Democrats to bonus depreciation that the GOP passed in the 2017 tax law, which allows companies to deduct 100 percent of the value of an asset in the year it is put into service. The new legislation proposes to gradually reduce this from next year.
Defending the new tax, the Democratic-led Senate Finance Committee on Thursday released data from the nonpartisan Joint Committee on Taxation showing that as many as 125 billion-dollar companies had an average effective tax rate of just 1.1 percent in 2019. The committee claims in its announcement that this shows the “low tax rates” that some companies are able to pay.
“While we know that billion-dollar companies avoid paying their fair share, these tax rates are lower than we might imagine,” said Senate Finance Chairman Ron Wyden, D-Oregon. “We’re going to stop it with our 15 percent marginal tax.”
This story and headline were updated with additional developments Thursday.
CNN’s Jessica Dean, Ella Nielsen, Claire Foran and Alex Rogers contributed to this report.
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