Senator Kyrsten Sinema of Arizona announced on Thursday night that she reached an agreement with Senate Majority Leader Chuck Schumer on passing Democrats’ $430bn climate and health care legislation known as the Inflation Reduction Act.
Ms Sinema was the last holdout among Democratic senators on the agreement, struck last week by Senate Majority Leader Chuck Schumer and Senator Joe Manchin.
The bill combats climate change, promotes renewable energy, reduces prescription drug prices and continues subsidies for the Affordable Care Act. If the bill ultimately passes, it would be a major domestic victory for President Biden, whose signature “Build Back Better” agenda has languished for the past year.
Ms Sinema said in a statement late Thursday evening that Democrats nixed the carried interest loophole, which allows general partners of private investment funds like hedge funds or venture capital firms to have their income taxed as capital gains – which is taxed at a lower rate than income.
“We have agreed to remove the carried interest tax provision, protect advanced manufacturing, and boost our clean energy economy in the Senate’s budget reconciliation legislation,” Ms Sinema said in a statement. “Subject to the Parliamentarian’s review, I’ll move forward.”
Ms Sinema has long expressed reservations about raising taxes, whereas Mr Manchin worried about the total price tag. The legislation is significantly pared down from Mr Biden’s proposed Build Back Better legislation, which Mr Manchin announced he opposed in December.
“Following this effort, I look forward to working with Senator [Mark] Warner to enact carried interest tax reforms, protecting investments in America’s economy and encouraging continued growth while closing the most egregious loopholes that some abuse to avoid paying taxes,” Ms Sinema said in a statement.
In a press conference on Friday, Mr Schumer said that in exchange for getting rid of the carried interest loophole, Ms Sinema added in an excise tax on stock buybacks, wherein a company buys its own stock on the market.
“I think they're one of the most self serving things that corporate America does. Instead of investing in workers and in training and in research, and in equipment,” he said of stock buybacks. “They just simply they don't do a thing to make their company better and they artificially raise the stock price by just reducing the number of shares.”
Democrats hope to pass the legislation through what is called budget reconciliation, which would allow it to pass with a simple majority and avoid a Republican filibuster. But with only 50 Senators in their conference, they needed every senator on board, with Ms Sinema being the final holdout.
Senators from both parties attempted to court the Arizona Democratic Senator’s vote aggressively. On Thursday, she and Mr Manchin were seen speaking on the Senate floor on Thursday during a vote on a judicial nominee. But at different points, she spoke to Republican Senators Lisa Murkowski of Alaska, Todd Young of Indiana and Bill Cassidy before returning to Mr Manchin.
It was during that conversation when Mr Schumer announced that the Senate would reconvene on Saturday to vote on a motion to proceed on the Inflation Reduction Act.
The legislation is now under review by Senate Parliamentarian Elizabeth McDonough, who will review if any part of the bill is “extraneous matter” unrelated to the budget. The process is known as the Byrd Bath, in reference to Mr Manchin’s predecessor from West Virginia, Senator Robert Byrd.
Mr Schumer said in a press conference on Friday that he decided not to have the Senate in session that day to give Ms McDonough the opportunity to properly review the legislation.
“Now we're confident that at the end of the day, we will have preserved the core components of the inflation Reduction Act.” he said.
The chamber will convene on Saturday to vote on a motion, paving the way for final debate on the bill, Mr Schumer said on Thursday. It could be the Democrats’ last chance to pass major legislation ahead of the midterm elections, when Republicans may win back control of the House of Representatives.
Mr Biden, who is currently in isolation after testing positive for Covid-19, for his part hailed the agreement in a late-night statement.
“The Inflation Reduction Act will help Americans save money on prescription drugs, health premiums, and much more,” he said. “I look forward to the Senate taking up this legislation and passing it as soon as possible.”
If passed, the legislation would be one of the most significant investments to combat climate change in American history. It would also allow Medicare to negotiate the price of prescription drugs, as well as continue subsidies for the Affordable Care Act through using savings from Medicare.
