Democrats fight for Sinema’s support on climate, health and tax bill

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Senate Democrats are discussing whether to cut some of their proposed taxes aimed at wealthy investors and billion-dollar corporations, as part of a new fight to win the support of Sen. Kyrsten Sinema (D-Ariz.) and move quickly on its broader economic agenda.

A week after brokering a deal that secured a mandatory vote for Sen. Joe Manchin III (DW.Va.), the party’s top lawmakers have turned their attention to calming the other centrist fiscal hawk in their ranks. They have actively engaged Sinema in private negotiations in recent days, opening the door to potential revisions to the health care and climate-focused bill known as the Reducing Inflation Act.

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Publicly, Sinema has not said anything about the measure and his advisers maintain that he is still reviewing it. Behind the scenes, however, the senator has spoken with Democrats about at least two of the proposal’s tax provisions, according to two people familiar with the matter who spoke on condition of anonymity to describe the sensitive negotiations.

The first involves toughening a policy that benefits hedge fund, private equity and real estate managers by taxing much of their compensation at a lower rate than most other earned income. The second establishes a minimum tax on large and profitable companies that pay nothing to the US government. In both, Sinema’s exact requests are unclear, although he has previously expressed some openness to a minimum corporate tax. People familiar with the talks noted that the discussions are fluid.

The two proposals, along with other cost-cutting and revenue-enhancing bill components, are expected to collectively generate about $739 billion in new federal funding. The amount is enough to offset new spending by Democrats on health care and climate, while also generating about $300 billion that can pay for the deficit over the next decade.

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But resolving Sinema’s concerns could require party leaders threading a narrow needle, as they work to preserve a delicate deal that has satisfied Manchin and his fellow Democrats at a time when some in the party share conflicting views on how better respond to an economy facing large price spikes and other major challenges. Meanwhile, Republicans vehemently oppose the bill, with many approaching Sinema directly on the Senate floor late Tuesday night.

Speaking to reporters earlier in the day, Manchin acknowledged that he and Sinema are “exchanging text messages back and forth.” Minutes before their press conference, the two legislators spoke in the Senate, with Manchin kneeling beside Sinema as she presided over the chamber.

“She will make a decision based on the facts,” Manchin said afterward.

Sinema’s office declined to comment.

For Democrats, their campaign to rethink the US tax code has been rocky for more than a year.

Since winning the House, Senate, and White House in 2020, President Biden and allied lawmakers have vowed to undo the tax cuts President Donald Trump adopted in 2017. Democrats argue that the rate cuts they have disproportionately benefited corporations and the wealthy; Republicans have argued that the cuts were essential to fostering economic growth before the coronavirus pandemic.

Democrats initially aimed to raise tax rates as part of their initial economic package, the ill-fated roughly $2 trillion Build Back Better Act. But they ultimately failed after Sinema opposed any changes to individual and corporate tax levels. After Democrats killed the proposals last fall, apparently securing Sinema’s support, Manchin shortly thereafter voiced his opposition to the bill and his price. It was approved by the House, but never came to a vote in the Senate.

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In restart the economic agenda of the Democrats last week, Senate Majority Leader Charles E. Schumer (DN.Y.) crafted a new approach with Manchin. Instead of raising rates on all businesses, the two men agreed to implement a minimum 15 percent tax on corporations that pay nothing. This week, Democrats described the proposal as fair, citing the fact that businesses in “many cases are paying a lower tax rate than firefighters and nurses,” as Sen. Ron Wyden (D-Ore.) put it. leader of the Senate Finance Committee, put it on Tuesday.

Democrats also focused on the ways that private equity and hedge fund managers pay taxes on fees paid to them by their clients. The lawmakers said their plan amounts to closing the “earned interest loophole,” which allows these investment managers to pay taxes on those fees at the much lower rate charged on capital gains instead of the rate. that most Americans pay on top of wages.

In recent days, Democrats have lined up behind the plan, but Schumer and Manchin crafted those fiscal policy outlines without immediate input from Sinema. Like Manchin, however, Sinema’s vote is crucial: Democrats must unite if they hope to pass the bill under the process known as reconciliation. That procedure only works if all 50 Democrats and Vice President Harris come together to vote for the legislation, overcoming a filibuster by the GOP.

“We are in contact with Senator Sinema, we are in contact with all the members. I am very hopeful that we will all stick together and pass this bill,” Schumer said at a news conference on Tuesday.

The discussions rankled some Democratic advisers this week. While they acknowledged that Sinema had already made clear his concerns with accrued interest changes, they thought he had supported an earlier attempt to impose a corporate floor tax after Biden tried to rewrite the Build Back Better Act.

Sinema offered her views in October, appearing to weigh her words carefully. in a cheepHe described it as a “common-sense step” that would ensure companies pay “a reasonable minimum corporate tax on their profits,” adding that he would “continue discussions” with the White House on economic issues.

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Meanwhile, Republicans sought to increase the pressure on Sinema and her fellow Democrats. On Tuesday, Republican lawmakers signaled they plan to force the tax issue once the bill reaches the floor, as the reconciliation opens the door for them to offer unlimited amendments.

In a possible sign of his lobbying campaign, Senate Republicans were seen all day on the chamber floor huddled directly with Sinema. Speaking to reporters, Senator John Thune (RS.D.), the second-ranking House Republican, criticized policies such as “huge tax increases for American businesses that create jobs, because we all know that will trickle down” to Americans.

Tax experts have debated in recent days the merits of the minimum tax, with Republican opponents saying it could dissuade corporations from claiming many of the incentives in the tax code designed to encourage corporate investment. Many Democratic tax experts are also skeptical about the merits of such a measure, and Treasury Department officials last year concerns expressed about the idea when the White House was pushing it.

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