WASHINGTON — Sen. Kyrsten Sinema is seeking to preserve a tax break for investment managers and narrow a levy hike on large corporations in the economic package Democrats want to pass as soon as this week, people familiar with the discussions said.
The Arizona Democrat, a pivotal vote in the Senate, is asking to drop a provision from the bill that would narrow a tax break for fund managers, known as carried interest, according to one person, who asked for anonymity because the discussions are private. She is also pushing to narrow the 15% domestic minimum tax on financial profits, also known as the book tax, people said.
Democrats need Sinema’s support to pass the bill using the fast-track budget procedure they are employing to bypass Republicans. Changing the tax provisions risks irking West Virginia Sen. Joe Manchin, who negotiated the package with Senate Majority Leader Chuck Schumer. Manchin has said he is “adamant” that the carried interest change remain in the bill.
Manchin told reporters he has not heard of Sinema trying to remove the carried interest provision. Hannah Hurley, a spokesperson for Sinema, declined to comment about any requests to change the bill.
Politico and Axios previously reported details of Sinema’s negotiations.
Sinema has been faced with a barrage of lobbying from business interests and Senate Republicans. 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 proposal went public last week.
One way to make the corporate minimum tax less costly to businesses is to let companies still claim depreciation tax breaks for their investments in equipment and facilities. The levy, as currently drafted, doesn’t allow businesses to claim those benefits.
The tech and manufacturing industries would be some of the most affected sectors from the book tax without the change. Companies, including Alphabet Inc.’s Google and General Motors Co., could be subject to the tax if it were to become law in its current form.
Republican Sens. John Thune and Rob Portman, who have been speaking with Sinema, have both raised concerns with how the minimum tax could undercut tax breaks that are designed to help companies to innovate and grow. Portman, at a press conference Wednesday, pointed to a bipartisan bill that passed by the Senate last week to provide funding and tax incentives for semiconductor companies as an example of how Congress has repeatedly encouraged business investment.
“Every developed country in the world helps to encourage their manufacturers to make more investments,” he said. “And here we are, less than a week later, saying, ‘you know what? We’ve changed our minds’?”
Sinema praised the corporate minimum tax last year when it was introduced in the Senate, without endorsing specifics. She was involved in the development of the proposal, but that was before inflation spiked and a possible recession loomed.
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 or trim some of the spending on climate and health initiatives.
Nixing the carried interest provision would only cut $13 billion from the $739 billion revenue expected to be raised by the package. The minimum corporate tax at 15%, however, is the biggest revenue generator in the bill, estimated at about $313 billion.
