Comment Senate Democrats are debating whether to roll back some of the proposed taxes targeting wealthy investors and billion-dollar corporations, part of a new fight to win the support of Sen. Kyrsten Sinema (D-Ariz.) and quickly advance their broader economic agenda. A week after brokering a deal that secured the needed vote of Sen. Joe Manchin III (DW.Va.), the party’s top lawmakers turned their attention to appeasing the other centrist fiscal hawk in their ranks. They have actively engaged Sinema in private negotiations in recent days, opening the door to possible revisions to the health care and climate bill, known as the Deflation Act. Democrats are racing to pass inflation-reducing legislation this week Publicly, Cinema has said nothing about the measure, and aides say it is still considering it. Behind the scenes, however, the senator has been talking to Democrats about at least two of the tax provisions in the proposal, according to two people familiar with the matter who spoke on condition of anonymity to describe the sensitive negotiations. The first involves tightening a policy that benefits hedge funds, private equity and real estate managers by taxing much of their compensation at a lower rate than most other income. The second sets a minimum tax on large, profitable corporations that pay nothing to the US government. In both, Sinema’s exact demands are unclear, although it has previously expressed some openness to a minimum corporate tax. People familiar with the talks cautioned that discussions are fluid. The two proposals — along with other cost-cutting and revenue-raising components of the bill — together are expected to bring in about $739 billion in new federal funds. The amount is enough to offset the Democrats’ new spending on health care and climate, while still creating about $300 billion that can pay the deficit over the next decade. How the Schumer-Manchin climate bill could affect you and change the US But resolving Sinema’s concerns could require party leaders to thread a tight 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 competing views. on how best to respond to an economy facing significant price increases and other significant challenges. Republicans, meanwhile, strongly oppose the bill, and many approached Sinema directly on the Senate floor late Tuesday. Speaking to reporters earlier in the day, Manchin acknowledged that he and Cinema “have been texting back and forth.” Only minutes before his press conference, the two MPs spoke in the Senate, with Manchin kneeling next to Cinema as he presided over the chamber. “He’s going to make a decision based on the facts,” Manchin said afterward. Sinema’s office declined to comment. For Democrats, their campaign to overhaul the US tax code has been difficult for more than a year. Since winning the House, Senate and White House in 2020, President Biden and allied lawmakers have pledged to unwind the tax cuts passed under President Donald Trump in 2017. Democrats argue that the rate cuts have benefited disproportionately corporations and the wealthy. Republicans have argued that the cuts were necessary to boost economic growth before the coronavirus pandemic. Democrats originally 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 faltered after Sinema opposed any change to personal and corporate tax levels. Once Democrats removed the proposals last fall, seemingly securing Cinema’s support, Manchin immediately voiced his opposition to the bill and his honor. It passed the House, but never came to a vote in the Senate. The two-week fight that saved the Democrats’ climate agenda In rebooting the Democratic economic agenda last week, Senate Majority Leader Charles E. Schumer (DN.Y.) worked out a new approach with Manchin. Instead of raising rates on all companies, the two men agreed to implement a minimum tax of 15 percent that applies to companies that pay nothing. This week, Democrats cast the proposal as a fairness one, citing the fact that corporations “in many cases pay a lower tax rate than firefighters and nurses,” as Sen. Ron Wyden (D-Ore.), the leader of the Senate Finance Committee, raised it on Tuesday. Democrats also took aim at the ways in which private equity and hedge fund managers are taxed on the fees paid to them by their clients. Lawmakers said their plan amounts to closing the “carried interest window,” which allows these investment managers to pay taxes on those fees at a much lower rate charged on capital gains rather than the rate they pay most Americans for wages. Democrats in recent days have rallied behind the plan, but Schumer and Manchin worked out those tax policy outlines without Sinema’s direct input. Like Manchin, however, Sinema’s vote is critical: Democrats must rally if they hope to pass the bill as part of the process known as reconciliation. That process only works if all 50 Democrats and Vice President Harris rally to vote for the legislation, overcoming a GOP rift. “We are in touch with Senator Sinema, we are in touch with all the members. I am very optimistic that we will all stand together and pass this bill,” Schumer said at a press conference on Tuesday. The debates irked some Democratic aides this week. While they acknowledged that Sinema had already made clear her concerns about the changes to the carried interest, they believed she had supported an earlier effort to impose a minimum corporate tax after Biden tried to rework the Build Back Better Act. Cinema offered her views in October, appearing to analyze her words carefully. In a tweet, he described it as a “common sense step” that would ensure companies pay a “reasonable minimum corporate tax on their profits,” while adding that he would “continue discussions” with the White House on economic issues. Democrats’ side deal with Manchin would speed up projects, West Virginia gas Republicans, meanwhile, tried to increase the pressure on Cinema and her fellow Democrats. On Tuesday, GOP lawmakers indicated they intend to force the issue on taxes once the bill hits the floor, as the compromise opens the door for them to offer unlimited amendments. In a possible sign of their lobbying campaign, Senate Republicans throughout the day were seen on the floor of the chamber crowding directly with Sinema. Speaking to reporters, Senator John Thune (RS.D.), The chamber’s second-ranking Republican blasted the policies as “big tax increases on American companies that create jobs, because we all know that’s going to be passed on” to Americans. Tax experts have debated the merits of the minimum tax in recent days, with GOP opponents saying it could discourage companies from claiming many of the incentives in the tax code designed to encourage corporate investment. Many Democratic tax experts are also skeptical of the merits of such a measure, and Treasury officials last year expressed concerns about the idea when the White House was pushing it.
