In a statement, Sinema said it won several changes to the tax provisions of the package, including the elimination of the tax on accrued interest, which would have affected hedge fund managers and private equity. That proposal would have raised $14 billion.
“We have agreed to remove the accrued interest tax provision, protect advanced manufacturing and boost our clean energy economy in the Senate budget reconciliation legislation,” Sinema said. “Subject to MP’s review, I will move forward.”
Sinema’s support is critical given that all 50 Republicans will oppose a plan they argue would hurt the economy and cost far more than Democrats contend, so any Democratic defection could sink it.
As CNN previously reported, Democrats agreed to add a special tax on company share buybacks as part of the deal.
“The deal will include a new special tax on share buybacks that will generate far more revenue than the accrued interest provision, meaning the deficit reduction figure will remain at $300 billion,” a Democrat familiar with the matter told CNN. with the agreement.
The $300 billion deficit reduction goal had been a key priority of Sen. Joe Manchin, whose agreement to the deal last week revived the legislation.
“The agreement preserves major components of the Reduce Inflation Act, including lowering prescription drug costs, combating climate change, closing tax loopholes exploited by large corporations and the wealthy, and reducing the deficit by $300 billion,” Senate Majority Leader Chuck Schumer said 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 enacting this landmark legislation.”
High risk negotiations
Earlier Thursday, top Senate Democrats engaged in high-stakes negotiations with Sinema, actively discussing potential changes to major tax components to secure support from the Arizona moderate.
In private discussions, Sinema had raised concerns about key parts of the Democrats’ plan to pay for her climate and health care package: imposing a minimum 15% tax on large corporations and taxing so-called accrued interest, which would mean imposing a new levy on hedge fund managers and private equity.
As a result, Democrats had been scrambling 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, voicing the view of much of his caucus earlier Thursday that Sinema would eventually join.
It is unclear when MP Elizabeth MacDonough will announce her decision on the package. A Democratic aide told CNN that the Senate Finance Committee’s energy provisions, particularly clean energy appropriations, are scheduled to go before the Senate parliamentarian on Friday.
It is not clear whether all of these provisions will survive parliamentary review.
Heavy pressure on Sinema
Sinema wasn’t part of the deal, and she found out when the news broke last week. She had refused to comment publicly on the deal, and her aides said only that she would wait until the Senate MP did the review before taking a position. However, she had made her demands clear with Democratic leaders, including seeking to add $5 billion to help the Southwest cope with its multi-year drought, according to multiple sources.
“Is it written in a way that is bad?” 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 willing to open this up and maybe make it better,” Seiden said.
Two sources told CNN that Sinema had privately aired those concerns to top Democrats, arguing it would hurt manufacturers, even in her state.
At issue are the Democrats’ proposed changes to additional depreciation that the GOP enacted in the 2017 tax law, which allows businesses to deduct 100% of the cost of an asset the year it is placed in service. The new legislation proposes to phase it out starting 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 averaged just a 1.1 percent effective tax rate in 2019. The committee argues in its report that this shows the “minimum tax rates” that some businesses can pay.
“While we know that billion-dollar companies avoid paying their fair share, these tax rates are lower than we could have imagined,” said Senate Finance Chairman Ron Wyden, D-Ore. “We’re going to end it with our 15 percent minimum tax.”
This story and headline have been updated with additional developments on Thursday.
CNN’s Jessica Dean, Ella Nilsen, Clare Foran and Alex Rogers contributed to this report.