After 18 months of infighting, frustration and failure, Democrats are on the verge of passing a version of their economic and climate legislation that, while scaled back from their grand initial aspirations, nevertheless would represent a landmark achievement.
The party came one step closer Thursday evening when Sen. Kyrsten Sinema (D-AZ) announced she would agree to “move forward” with the legislation, dubbed the Inflation Reduction Act, pending approval by the Senate parliamentarian.
Sinema’s sign-off came after Senate Democrats agreed to a number of changes she had sought, including the removal of a provision narrowing the so-called carried-interest tax loophole that allows hedge fund and private equity managers to pay a lower rate on some of their profits. Democrats also modified their proposed 15% corporate minimum tax to address Sinema’s concerns that it might hurt U.S. manufacturing businesses. And they agreed to provide billions in drought funding Sinema had sought.
Sinema’s interest in carried interest: Senate Majority Leader Chuck Schumer said Friday that Sinema left Democrats “no choice” but to drop the carried-interest provision, which had been expected to raise $14 billion in revenue over 10 years. “Senator Sinema said she would not vote for the bill, not even move to proceed unless we took it out,” he said. “So we had no choice.”
In her announcement Thursday evening, Sinema said that she would work with Sen. Mark Warner (D-VA) on reforms to carried interest tax law, “protecting investments in America’s economy and encouraging continued growth while closing the most egregious loopholes that some abuse to avoid paying taxes.”
Adding a new tax on stock buybacks: To make up for the revenue lost to those tax changes, Democrats added in a 1% excise tax on stock buybacks that will reportedly raise $74 billion over 10 years — more than would have been generated by the provisions that were dropped.
Sinema’s influence: The Arizona senator may have been left out of private negotiations between Schumer and Sen. Joe Manchin (D-WV), the other centrist holdout. But as Lisa Mascaro of the Associated Press points out, she ultimately played a huge role in shaping the legislation in ways that have drawn scorn, particularly from progressives, but sometimes from conservatives as well.
“It was Sinema early on who rejected Biden's plan to raise the corporate tax rate from 21% to 28%, as she broke with party's primary goal of reversing the Trump-era tax break Republicans gave to corporate America,” Mascaro notes. “Sinema also scaled back her party's long-running plan to allow Medicare to negotiate lower drug prices with the pharmaceutical companies as a way to reduce overall costs to the government and consumers. She limited which drugs can be negotiated.”
What’s next: The Senate is due to return to session Saturday at noon, with a vote on the motion to proceed to the reconciliation bill expected sometime later in the day. After up to 20 hours of debate, the Senate will begin a “vote-a-rama,” an unlimited series of amendment votes. The vote-a-rama is “going to start later than we imagine, it’s going to run longer than we would hope and it’s going to be more painful getting out of here than any of us have any reason to expect,” said Sen. Chris Coons (D-DE). And Sen. Lindsey Graham (R-SC) predicted that Republicans would look to make the vote-a-rama feel “like hell” for Democrats.
The bottom line: Now that Sinema is on board, the Senate could be set to pass the reconciliation bill as soon as Sunday evening, or more likely by Monday or Tuesday. The House would then follow, meaning Biden could be celebrating another major White House signing ceremony within days.