WASHINGTON — The Senate is “on track” to start debating a roughly $300 billion deficit-reducing budget package Saturday after Democrats reached agreement late Thursday on changes to the bill needed to secure 50 votes, Senate Majority Leader Charles E. Schumer said.
The changes, the New York Democrat said at a news conference Friday, include dropping a provision modifying the taxation of “carried interest,” providing exemptions to the 15% corporate minimum tax that would reduce its estimated revenue raised over 10 years from $313 billion to $258 billion, and adding some climate provisions related to drought.
“We’re feeling pretty good,” Schumer said, noting he believes the agreement will have the votes to pass.
If so, the bill would then go to the House, which is expected to reconvene Aug. 12 to vote on it, according to a notice Friday from Majority Leader Steny H. Hoyer, D-Md.
Schumer acknowledged that the late changes to the bill were made to secure support from Democratic centrist Sen. Kyrsten Sinema of Arizona. In particular, he lamented the loss of a $13 billion revenue raiser that would have lengthened the holding period for investment fund managers’ share of their clients’ capital gains required to benefit from more generous tax treatment.
“I believe strongly in (closing) the carried interest loophole. I have voted for it. I have pushed for it. I pushed for it to be in this bill,” Schumer said. “Sen. Sinema said she would not vote for the bill, not even move to proceed unless we took it out. So we had no choice.”
Schumer did not provide details on the corporate minimum tax exemptions that would drop the revenue intake of the provision by $55 billion, but Sinema’s statement on the deal Thursday noted a plan to “protect advanced manufacturing.”
That’s likely a reference to allowing businesses to factor accelerated depreciation, or faster writeoffs of equipment purchases, when they calculate the minimum tax, which is based on income reported to shareholders. On financial statements, the cost of an asset is spread over its usable life, but the tax code allows deductions faster, so the change would likely protect that treatment in some form.
Republicans and business groups had raised alarms about the disproportionate impact the minimum tax would have on manufacturers if they could not claim those deductions. Although business groups welcomed the change, they did so qualifying that they needed to see the legislative language and that they still oppose other aspects of the bill, like the drug pricing provisions.
Neil Bradley, U.S. Chamber of Commerce executive vice president and chief policy officer, issued a statement giving Sinema credit for recognizing that “taxing capital expenditures — investments in new buildings, factories, equipment, etc. — is one of the most economically destructive ways you can raise taxes.”
Substitute tax
To make up for the lost revenue from the corporate minimum tax exemptions and dropping the carried interest provision, Democrats added a 1% excise tax on stock buybacks, which Schumer said would raise $74 billion over 10 years.
“I hate stock buybacks. I think they’re one of the most self-serving things that corporate America does,” Schumer said. “Instead of investing in workers and in training and in research and in equipment, they just simply ... artificially raise the stock price by just reducing the number of shares. They’re despicable.”
The Chamber of Commerce opposes the stock buyback tax. Bradley said it “will only distort the efficient movement of capital to where it can be put to best use and will diminish the value of Americans’ retirement savings.”
Despite the prospect of tax increases, some companies are calling on Congress to quickly pass Democrats’ bill because of investments it would make in clean energy. About 40 companies, including U.S. divisions of European oil giants BP Plc and Shell Plc; automaker Ford Motor Co.; apparel companies VF Corp. and Levi Strauss and Co.; and ride-booking app Lyft Inc., signed onto a statement Friday backing the bill.
“This package promises to unleash American innovation and ingenuity — and to foster the creation of millions of jobs as a result,” the statement said.
In addition to the tax changes to the bill, Schumer confirmed there would be a climate addition on drought resilience that Sinema pushed for, but he said the details were still being worked out.
Schumer did not mention potential changes being made based on feedback from Senate Parliamentarian Elizabeth MacDonough about what complies with the “Byrd rule,” which mandates reconciliation provisions have more than a “merely incidental” impact on spending or revenues. But Schumer said MacDonough and her team were working all day Friday, scrubbing the bill “to make sure the Senate’s ready to act.”
Later on Friday, a trio of Democratic senators up for reelection this year in drought-stricken Western states — Mark Kelly of Arizona, Catherine Cortez Masto of Nevada and Michael Bennet of Colorado — announced that $4 billion for the Bureau of Reclamation to combat drought would be added to the package.
Republican appeals
Republicans, meanwhile, spent Friday putting pressure on Sinema and fellow Democratic centrist Joe Manchin III of West Virginia to back GOP-favored edits to the bill or reconsider their support entirely. Both Democrats have backed the package after a year of negotiations in which they flexed their power in the 50-50 Senate to shape and shrink the legislation.
“To Manchin and Sinema, thank you for holding the line on the Senate filibuster; thank you for doing some things to make America a less radical place,” Lindsey Graham, Senate Budget’s ranking Republican, said during a GOP news conference. “But you are going to be held accountable by your voters on this issue.”
Graham specifically targeted Manchin, saying Republicans may not go along with including a permitting overhaul in a stopgap measure to keep the government open after current funding expires Sept. 30. Democratic leadership promised to try to move provisions to speed up energy projects by Oct. 1 as part of their deal with Manchin on reconciliation.
“I will not vote for a continuing resolution that is part of a political payback scheme,” Graham said.
He added that if he could get priorities added for his home state of South Carolina he’d consider going along and urged other senators to demand the same. If not, Graham said he’ll need to see a “clean” measure.
Schumer declined to comment on Graham’s CR threat other than to say, “It’s a long time away.”
‘Vote-a-rama’
Republicans also pledged to force tough votes during the “vote-a-rama” process, in which they can offer unlimited amendments to Democrats’ bill before final passage.
“Energy, inflation, the border and crime — expect to see amendments on all of those things,” said Wyoming Sen. John Barrasso, a member of Republican leadership.
Republicans are also expected to target the new taxes in the bill, attempting to put Democrats on the record backing tax increases on households earning less than $400,000 — the line Democrats have pledged not to cross.
Senate Finance ranking member Michael D. Crapo, R-Idaho, released new Joint Committee on Taxation data Friday showing that even with an extension of bigger tax credits to help purchase health insurance, low- to middle-income households still face tax increases.
The analysis, which incorporated the more onerous corporate minimum tax before it was scaled back, showed that about 78% of households earning between $50,000 and $75,000 next year would see their tax bills rise by at least $100, for instance. A little over 3% of households in that income category would see tax cuts on average.
The analysis didn’t incorporate the bill’s “Superfund” tax on oil production and imports, or the stock buyback tax, which Republicans said could add to the burden on households.
But it also didn’t include benefits that would lower costs for some taxpayers, Democrats point out, like home energy-efficiency and electric vehicle credits, and savings from lower prescription drug prices.
“The administration has been very careful to say that the ‘individual income tax rate’ would not change for anyone making less than $400,000 per year, yet everyone knows that the corporate tax burden falls on workers and consumers, as well as owners,” Crapo said in a statement.
At Friday’s news conference, Republican Whip John Thune of South Dakota called on Manchin and Sinema to oppose a “wrap-around amendment” that would likely come from Democratic leadership at the end of the vote-a-rama to wipe out any successful GOP amendments.
Thune said if Republican amendments stick, they “could make it better. Might make it harder to pass in the House, who knows.”
Graham suggested Republicans may want to force harder votes after some backed the bipartisan “chips and science” bill, only for Manchin and Schumer to unveil their reconciliation deal hours later. Some Republicans had threatened not to move forward on that issue while Democrats were pursuing their own tax and spending package.
“Before the ink is dry on that bill, they drop this,” Graham said. “So what will vote-a-rama be like? It’ll be like hell.”
