Senate Democrats are ringing eggshells around Sen. Kyrsten Sinema (D-Ariz.) and crossing their fingers that she will agree to backing sweeping tax reform and a climate bill passed by Senate Majority Leader Charles Schumer (DN.Y. ) and Sen. Joe Das, Manchin (DW.Va.) announced on Wednesday.
Sinema was left out of the final stage of negotiations between Manchin and Schumer, despite playing a big role in drafting the prescription drug reform bill, which will be included in a budget voting package along with tax and climate provisions.
The Arizona senator, who played a central role in drafting the bipartisan infrastructure bill that went into effect last year, as well as recently passed gun safety legislation, declined to answer questions as she left the Capitol on Thursday.
Sinema has already expressed support for introducing a minimum tax of 15 percent for companies making more than $1 billion in profit, a key part of the deal that would net $313 billion.
But the bigger question is whether it will agree to close the carried-interest loophole, which allows wealth managers to pay only a 20 percent capital gains tax rate on income from managing profitable investments. The closure would raise an estimated $14 billion over 10 years.
Sinema spoke out against removing the carried-interest tax loophole last year, and critics were quick to point out how much money she accepts in campaign contributions from people in the private equity industry.
Carried interest language was removed from a tax and climate bill passed by the House last year to avoid a “no” from Sinema.
The mystery of how Sinema will vote deepened on Thursday she wasn’t there a special session of the Democratic Senate where Schumer explained the deal.
A Democratic senator who attended the session noted that it was not uncommon for Sinema to miss caucus meetings.
A Sinema spokeswoman said she was reviewing the text and had to see what came out of the parliamentary process.
Sinema remained silent as reporters bombarded her with questions as she walked to her car on the east front of the Capitol. The last question she heard shouted before closing the door of her vehicle was, “Are you going to sink the bill?”
Sinema made her mark on the bill early in negotiations last year, stating that she would not support raising marginal tax rates for individuals or raising the corporate tax rate above the current level of 21 percent.
Instead, to appease Sinema, the White House proposed an adjusted gross income tax of 5 percent on incomes over $10 million, affecting only the 0.02 percent of wealthiest Americans.
Sinema last year hailed a 15 percent minimum corporate tax as “a sensible move” to ensure that highly profitable companies “pay a reasonable minimum corporate tax on their profits, just like everyday Arizonans and small Arizona businesses do.”
Schumer seems confident he will have Sinema’s vote for the tax and climate bill, which will cost an estimated $124 billion.
“This Democratic Senate majority will ensure that we close tax loopholes and get the wealthiest companies and individuals to pay their fair share,” he announced in the Senate Thursday afternoon. “Many in Washington have promised to address these challenges, but where previous efforts have failed, Senate Democrats and this majority will act quickly to deliver to the American people.”
When asked about Sinema, Schumer told reporters only that she was checking the bill.
Closing carry interest loopholes has been a priority for some Democrats for more than a decade, but the issue has divided the party.
In 2010, then-Chairman of the Senate Finance Committee Max Baucus (D-Mont.) and then-Chairman of the House Ways and Means Committee Sander Levin (D-Mich.) attempted to close the carried interest loophole, to pay a package of unemployment benefits but tax expanders faced opposition from then-Sen. John Kerry (D-Mass.) and Sen. Maria Cantwell (D-Wash.).
Since then, sentiment in the Democratic faction has overwhelmingly shifted in favor of closing the loophole.
“Frankly, many on Wall Street have come to believe that if there was any justification” for taxing money managers’ income at the capital gains rate, “it’s long gone,” said Sen. Richard Blumenthal (D-Conn.), whose state is home to many wealth managers and investment gurus.
Private equity groups and hedge funds are already mobilizing to remove the provision from the budget package, warning on Thursday it would hurt small businesses as well as endowments and pension funds, according to a Reuters report.
However, Manchin says he is “adamant” about keeping the carried-interest provision in the bill.
“I’m not ready to lose it,” he said. “What we have is a good bill that is fair to everyone. It’s an offer of give and take.
“I think the people who’ve benefited from carried interest for years knew they were on a good run, it was long overdue to get rid of it and you can’t justify it anymore.”
Meanwhile, Senate Democrats, surprised by Sinema’s unexpected opposition to raising marginal income tax and corporate tax rates last year, are wary of making predictions about where she will end up on the issue.
“I don’t speak for Sen. Sinema, but obviously she’s reviewing the bill and will have something to say on it soon,” said Sen. Chris Murphy (D-Conn.). “I’m always hopeful.”