Sinema Wants to Prevent Closure of Tax Loophole for Rich in Reconciliation Bill

As Senate Democrats try to finalize their reconciliation package, corporate-friendly Senator Kyrsten Sinema is demanding that language be removed from language that targets a tax loophole that primarily benefits wealthy private equity investors and billionaire managers of hedge funds.

Politico reported Wednesday that the Arizona Democrat — a major recipient of private equity campaign cash — “wants to nix language narrowing the so-called carried interest loophole,” which allowsSome ultra-wealthy executives pay a lower rate of tax than ordinary employees.

Sinema also wants “roughly $5 billion in drought resiliency funding added to the legislation, a key ask for Arizona given the state’s problems with water supply,” Politico noted.

The carried interest provision in the reconciliation package would increase an estimatedOver a decade, federal revenue reached $14 billion. This was achieved by allowing more income from wealthy investors to be subjected to a higher tax rate than the 20% long-term capital gain rate.

Sinema, however, has been vocally opposed to reforms to carry interest loopholes. She helped to secure the removal carried interest changes from now-defunct Build back Better Act last year.

Sen. Joe Manchin (D-W.Va.), was the one who negotiated the new agreement. Inflation Reduction Act, has said he is “adamant” about keeping the carried interest change in the legislation, setting up a potential conflict between the party’s two right-wing obstructionists as Democrats attempt to pass the bill this week.

“The carried interest loophole only benefits the wealthiest hedge fund managers and private equity investors — like the one Sen. Sinema
interned for last summer,” the Progressive Change Campaign Committee (PCCC) tweeted Wednesday, referring to Sinema’s stint at a winery owned by private equity mogul Bill Price.

Sinema held an August 2008 a high-dollar fundraiserAt the winery.

“Will she sink our last chance at investing in climate on behalf of her private equity buddies?” PCCC asked.

Robert Reich, the former secretary of U.S. Department of Labor noted Wednesday that “Wall Street has donated over $2 million to Sinema since she took office in 2017.”

“Looks like they are getting a huge return on their investment,” Reich added.

According to Bloomberg, Sinema is also pushing Democratic leaders to “narrow” the 15% corporate minimum taxIn the new legislation. The Tax Foundation estimatesManchin has endorsed the provision. vocally defended, would generate $200 billion in federal revenue over a ten-year period, which would help to finance a substantial portion of the $740 billion reconciliation package.

“Sinema has been faced with a barrage of lobbying from business interests and Senate Republicans,” BloombergWednesday report. “She has met in recent days with business groups representing her state as well as her GOP colleagues. Groups representing private equity and manufacturers have also been conducting advertising and advocacy campaigns to reach Sinema and Arizona voters since the proposal went public last week.”

As many as Common Dreams reported Tuesday, a prominent member of the Koch network launched ads urging Sinema to tank her own party’s bill, which includes major renewable energy investments and limited drug price reforms.

Bloomberg pointed out that “the changes Sinema is seeking could end up shaving tens of billions — or more — of revenue from the bill.”

“That would likely mean that Democrats would have to cut into some of the roughly $300 billion worth of deficit reduction in the bill,” the outlet noted, “or trim some of the spending on climate and health initiatives.”

In assessmentThe Congressional Budget Office released Wednesday’s findings, which showed that the bill would reduce the federal deficit by $102 billion over ten years.

Sinema’s support, along with that of every other member of the Senate Democratic caucus, is needed to get the legislation over the finish line.

On Tuesday letter endorsing the Inflation Reduction Act, nearly 130 leading economists including Joseph Stiglitz of Columbia University argued that the bill in its current form “would be more than fully paid for.”

“The revenue raised to finance them would come exclusively from wealthy individuals and corporations,” the economists wrote. “Further, the revenue stems from enhanced tax enforcement and closing some of the most distortionary loopholes in the tax code.”