Sen. Kyrsten Sinema (D-Ariz.) warned that she would obstruct the proposal, but Senate Majority Leader Chuck Schumer (D-N.Y.) claims he was forced to delete the clause addressing the so-called carried interest tax loophole for money managers, The Hill reports.
The Inflation Reduction Act’s carried interest tax provision was eliminated at an estimated cost of $14 billion in lost income, but Schumer made up for it by introducing a stock buyback excise tax that will bring in $74 billion.
According to Schumer, Sinema informed him she wouldn’t vote to start the discussion until he removed the clause that permits asset managers to pay a lower effective income tax rate than many middle-class Americans, despite his best efforts to address the carried interest tax loophole.
“I believe strongly in the carried interest loophole, I have voted for it, I have pushed for it, I have pushed for it to be in this bill,” he said, as quoted by The Hill. “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.”
According to the Wall Street Journal, Sinema warned supporters at a campaign event on Wednesday night that raising carried interest taxes on the private equity sector at a time when the sector is required to invest in infrastructure and semiconductor manufacturing would be a poor idea.
In order to allay Sinema’s worries that it would hurt manufacturing industries, Schumer also mentioned how he changed the 15 percent corporate minimum tax.
The corporate minimum tax provision would collect $258 billion less than its projected $313 billion over the next ten years, according to the Democratic leader, who claimed to have agreed to remove “two components” of it.
The 1 percent excise tax on stock buybacks, he added, will also be used to make up for the revenue loss.
Democrats will work to pass the legislation “as rapidly as we can,” according to Schumer, but Republicans have a number of strategies they may employ to delay it.
But he anticipated that the bill will pass at some point in the coming days with the backing of all 50 Democrats.