Senator Kyrsten Sinema on Thursday night offered critical support for President Joe Biden’s National Agenda after party leaders agreed to modify new tax proposals at her request, indicating she would ‘move forward’ on the Democrats’ sweeping economic package that has been the product of intensive negotiations for more than a year .
Sinema’s support means Democrats will likely have 50 votes in their caucus to push the bill through their chambers by the end of the week, before it returns to the House next week for final approval. .
And while the plan is scaled back from Biden’s initial Build Back Better package, the latest bill – named the Inflation Reduction Act – would represent the biggest investment in energy and climate programs in US history, extend three-year health care subsidies expiring and would give Medicare the power for the first time to negotiate prescription drug prices. The legislation would impose new taxes to pay for this.
One remaining hurdle for Democrats: A review by Senate Congresswoman Elizabeth MacDonough, who must decide whether the bill’s provisions meet strict rules to allow Democrats to use the filibuster-proof budget process to pass legislation along straight party lines.
But after days of discussions with Senate Majority Leader Chuck Schumer, Sinema indicated she was ready to vote to continue.
“Subject to parliamentary review, I will move forward,” she said in a statement after remaining silent on the bill for more than a week.
In the statement, Sinema said it had secured several changes to the tax provisions of the package, including the removal of the tax on deferred interest, which would have impacted hedge fund managers and private equity. This proposal would have raised 14 billion dollars. She also suggested she had won changes to Democrats’ plans to reduce how companies can deduct impaired assets from their taxes – a key demand from manufacturers who had lobbied Sinema over their concerns this week. .
“We agreed to remove the deferred interest tax provision, protect advanced manufacturing and boost our clean energy economy in the Senate budget reconciliation legislation,” Sinema said.
To make up for lost revenue, Democrats agreed to add a 1% excise tax on corporate stock buybacks as part of the deal, raising an additional $73 billion, according to a Democratic aide.
“The deal will include a new excise tax on share buybacks that will yield significantly more revenue than the deferred interest provision, meaning the deficit reduction figure will remain at $300 billion,” he said. a Democrat familiar with the deal told CNN.
The $300 billion deficit reduction target was a key priority of Sen. Joe Manchin, a West Virginia Democrat who signed the deal after negotiations with Schumer last week.
“The deal preserves key elements of the Cut Inflation Act, including cutting prescription drug costs, tackling climate change, closing tax loopholes operated by big business and the wealthy and $300 billion in deficit reduction,” Schumer said in a statement. “The final version of the Reconciliation Bill, which will be introduced on Saturday, will reflect this work and bring us closer to the enactment of this landmark legislation.”
Earlier Thursday, top Senate Democrats engaged in high-stakes negotiations with Sinema, actively discussing potential changes to key tax components to win the Arizona moderate’s support.
In private discussions, Sinema had expressed concern about key elements of the Democrats’ plan to pay for their climate and health care agenda – imposing a 15% minimum tax on big business and taxing so-called carried interest, which would mean imposing a new levy on hedge fund managers and private equity.
As a result, Democrats scrambled to find new sources of revenue to meet the goal of saving $300 billion over a decade.
“Failure is not an option,” said Sen. Richard Blumenthal, a Democrat from Connecticut, expressing the view of much of his caucus earlier Thursday that Sinema would eventually get on board.
Schumer announced earlier Thursday that the Senate would reconvene on Saturday and plans to take the first procedural vote to pass the bill. If the vote wins the support of all 50 members of the Democratic caucus, then there will be up to 20 hours of debate. After debate hour, there would be a process colloquially referred to on Capitol Hill. like “vote-a-rama”, which is the marathon series of amendment votes with no time limit before the final vote. If the bill finally passes, the House will have to act.
Democrats are trying to wrap up negotiations and make a successful economic pass before leaving town for a month-long hiatus in August. The measure would invest $369 billion in energy and climate change programs with the aim of reducing carbon emissions by 40% by 2030. For the first time, Medicare would have the power to negotiate the prices of certain drugs, and it would cap out-of-pocket costs at $2,000 for those enrolled in Medicare drug plans. It would also extend expiring enhanced grants for Affordable Care Act coverage for three years.
It is unclear whether all of these provisions will survive parliamentary scrutiny.
Sinema was not part of the deal, having found out when the news broke last week. She had declined to comment publicly on the deal, her aides saying only that she would wait until the Senate’s parliamentary review was completed before taking a position. Still, she had made her demands clear to Democratic leaders, including seeking to add $5 billion to help the Southwest deal with its multi-year drought, according to multiple sources.
As Democrats courted her, Republicans and business groups made their concerns known. In private call this week, the Arizona Chamber of Commerce and the National Association of Manufacturers, have urged Sinema to push for changes to the corporate minimum tax. Arizona Group of Companies President Danny Seiden told CNN he voiced business opposition to the 15% tax provision, noting it would particularly hit manufacturers who profit from a tax deduction for accelerated capital cost allowance which reduces their tax burden.
“Is it written in a way that is wrong?” Sinema asked, according to Seiden, president of the Arizona Chamber of Commerce, who relayed the call to CNN.
“It gave me hope that she’s ready to open this up and maybe make it better,” Seiden said.
Two sources told CNN that Sinema privately conveyed those concerns to leading Democrats, arguing it would hurt manufacturers, including in his state.
In an effort to break the deadlock, Colorado Sen. John Hickenlooper, a freshman Democrat, offered the excise tax on stock buybacks to Schumer as a way to compensate for lost revenue from Sinema’s demands. , according to a Democratic aide.
At issue are Democrats’ proposed changes to bonus depreciation that the GOP enacted in the 2017 tax law, which allows companies to deduct 100% of the cost of an asset in the year it is put into service. The new legislation proposes to gradually reduce this from next year.
It is unclear exactly how the new language is structured on this issue.
Defending the new tax, the Democratic-led Senate Finance Committee on Thursday released the date of the nonpartisan Joint Committee on Taxation showing that up to 125 billion-dollar companies averaged just one rate. effective tax rate of 1.1% in 2019. The commission argues in its statement that this shows the “lowest 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 have imagined,” said Senate Finance Chairman Ron Wyden, a Oregon Democrat. “We are going to put an end to it with our minimum tax of 15%.”
This story and headline were updated with additional developments on Thursday.