But Sinema’s agreement came with a notable condition: canceling a promise to end a notorious tax loophole that allows private equity and hedge fund managers to reduce their tax bills. On the face of it, the decision to stick with a provision that benefits some of America’s wealthiest people seems far removed from the concerns of voters in Sinema’s southwestern home state of Arizona. But an FT analysis shows the senator is the beneficiary of significant contributions from the private equity industry – whose lobbying machine and political influence have grown increasingly powerful over the past two decades. According to Federal Election Commission filings, Sinema has received more than half a million dollars in campaign donations from private equity group executives this election cycle alone, representing about 10 percent of its fundraising from individual donors. That includes individual donations totaling $54,900 from KKR executives, $35,000 from Carlyle, $27,300 from Apollo, $24,500 from Crow Holdings Capital and $23,300 from Riverside Partners. Sinema is not the only Democrat to have received funds from the private equity industry. Executives from groups including Blackstone, KKR and Lazard have also collectively donated $1.28 million to New York Sen. Chuck Schumer, the top Democrat in the Senate, representing about 4.4 percent of his fundraising from individual donors this cycle . A spokesman for Schumer said he was a “longtime advocate of closing the carried interest loophole,” adding that he “had worked to the end to try to keep the provision in the legislation and will continue to look for opportunities to eliminate it.” A Sinema spokesman said it has been “clear and consistent for more than a year that it will only support tax reforms and revenue options that support Arizona’s economic growth and competitiveness.” “At a time of record inflation, rising interest rates and slowing economic growth, preventing investment in Arizona businesses would hurt the economy and Arizona’s ability to create jobs,” the spokesman said. Sinema, who wields enormous influence in a Senate split 50/50 along party lines, has been a frequent roadblock to Democratic legislative plans, refusing to support several previous iterations of the Build Back Better bill, now rechristened into law to reduce inflation. After days of intense negotiations, Sinema this week agreed to “go ahead” with passing the legislation, after withdrawing a proposal to extend the holding period for investments eligible for deferred tax from three years to five. The so-called carried interest provision has survived a series of attempts to repeal it over the past 15 years, with former presidents Barack Obama and Donald Trump both promising to do so during their campaigns. The loophole began attracting headlines in 2007 when a tax law professor pointed out in an academic journal that a “quirk” in US tax law allowed some of America’s wealthiest people to “pay tax on their working income with low rate”. It was seriously threatened in 2010 and 2017, when Democrats and then Republicans tried to amend or remove it, but each time it escaped a political crackdown. Analysts attribute the controversial tax break’s survival — seemingly against the political odds — to its relatively low public profile and the success of an increasingly sophisticated private equity lobbying operation in Washington. “A lot of issues like this never get fixed and never go away, in large part because they’re great fundraising issues for politicians,” said James Lucier, an analyst at Capital Alpha Partners.

“My friends on K Street call them ‘evergreens,’” Lucier added, referring to the Washington street where lobbying firms are usually based. “These are issues that never get resolved, because they are very good for fundraising.” Democrats estimated that their proposal to close the carried interest loophole would bring in a relatively modest $14 billion. However, the tax provision is worth large amounts to the personal wealth of investment executives. “There’s a real asymmetry there,” said Andrew Park, senior analyst at the nonpartisan group Americans for Financial Reform. “This gap represents a lot of cash for individual private equity executives personally, so they’re putting money into the race to maintain it,” Park said. “But it doesn’t raise a huge amount of money, by U.S. government standards, so lawmakers often look to other sources.” Blackstone’s private equity executives were set to receive nearly half a billion dollars in interest-based deferred earnings at the end of last year, assuming their investments were sold at their value at year-end 2021, according to filings reviewed by the FT. * While the proposal to end the carried interest provision is politically popular among voters, according to Beacon Policy Advisors, it is not a charged enough issue to actually change voting patterns. “Alleged interest is the epitome of tax lobbying,” said Ben Koltun, director of research at Beacon. “There are certain taxes that many care a little about, but few care much about.” “The elimination of carried interest is popular in the polls,” he added. “But no politician is going to win or lose an election because of perceived interest.”

Key climate measures in the bill

Methane penalty: $900 per metric ton of methane emissions that exceed federal limits in 2024, rising to $1,500 per metric ton in 2026 Carbon capture and storage tax credit $85 per metric ton, up from $50 $30 billion for solar panels, wind turbines, batteries, geothermal units and advanced nuclear reactors, including tax credits over 10 years. It replaces short-term wind and solar credits $27 billion for the “green bank” to support clean energy projects, especially in disadvantaged communities. $20 billion to reduce emissions in agriculture $9 billion in rebates for Americans who buy and retrofit homes with energy-efficient appliances and appliances. $60 billion to support low-income communities and communities of color, includes grants for zero-emission technology and vehicles, highway pollution mitigation, bus depots and other infrastructure located near disadvantaged communities $10 billion in investment tax credits to build manufacturing facilities that make electric vehicles and renewable energy technologies Tax credit of up to $7,500 on the purchase of new clean vehicles and offers a first-time credit of $4,000 for used electric vehicles for households with a maximum annual income of $150,000

*This article has been modified from the original to reflect that Blackstone executives were set to receive nearly half a billion dollars in deferred interest-based compensation since the end of last year.

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