U.S. Senate Majority Leader Chuck Schumer (D-NY) holds his weekly news conference after the Democratic caucus luncheon at the U.S. Capitol in Washington, August 2, 2022.
Jonathan Ernst | Reuters
Senate Majority Leader Chuck Schumer said on Friday that Democrats “have no choice” but to remove a key tax provision from their major spending bill to gain the support of the Senate. Senator Kyrsten Sinema.
Sinema, a centrist Democrat from Arizona, refused to support the Inflation Reduction Act, the sweeping bill that covers much of the Biden administration’s tax, climate and healthcare agenda. Senate Democrats need her support to pass the bill through the Senate by a partisan vote using the budget mediation process, which requires a simple majority in the Senate. Senate, split 50-50 by party.
Sinema announced on Thursday night that she would actually support the legislation, following an agreement that “removes the transfer interest tax provision.”
She was referring to the bill including language that would close the so-called interest loophole, a feature of the tax code that both Republican Party member and Democrats – including the former President Donald Trump – tried to close.
Realized interest refers to the compensation that hedge fund managers and private equity executives receive from their companies’ investment returns. After three years, that money is taxed at a long-term capital rate of 20 percent, instead of a short-term capital interest rate, which peaks at 37 percent.
The Inflation Reduction Act aims to close that gap by extending the short-term tax rate to five years. The bill is expected to raise $14 billion over a 10-year period.
Schumer, DN.Y., said of the proposal to close this gap: “I tried to have it in this bill.
But “Senator Sinema said she won’t vote on the bill, not even proceed with the bill unless we remove it,” he said. “So we have no choice.”
Sinema emphasized on Thursday night that after the reconciliation bill was passed, “I look forward to working with [Sen. Mark Warner, D-Va.] enacted interest tax reforms that protected investments in the U.S. economy and encouraged continued growth while closing the most serious loopholes that some people abuse to avoid paying taxes. “
A Sinema spokesman defended the senator’s record when asked by CNBC on Friday about Schumer’s remarks and her stance on practical interests.
A spokesperson for Sinema “has been clear and consistent for over a year that it will only support tax reform and revenue options that support Arizona’s economic growth and competitiveness.” “At a time of record inflation, rising interest rates and slowing economic growth, discouraging investment in businesses in Arizona will hurt Arizona’s economy and job creation.”
Schumer said that another tax from the Inflation Reduction Act was introduced to secure the deal with Sinema. This comes from an imposing proposal The alternative 15% corporate tax rate is aimed at wealthy corporations accused of evading their tax obligations. It is projected to raise $313 billion — more than 40% of the bill’s revenue.
While that part of the bill was changed, “$258 billion of that remains, so most of it remains,” Schumer said.
And while the exercise interest clause was removed, Schumer said Democrats added an excise tax on stock buybacks that would bring in $74 billion. He said many of the lawmakers he spoke with were “excited” about that update.
“I hate stock buybacks,” Schumer said. “I want to delete them.”
