Democrats reached a deal with Sen. Kyrsten Sinema (D-Ariz.) on Thursday, securing her commitment to vote for their climate and health care bills in exchange for making several changes to the legislation.
“We agreed to repeal the carried interest tax provision, protect advanced manufacturing and strengthen the clean energy economy in the Senate budget reconciliation legislation. Subject to the MP’s assessment, I will proceed,” Sinema announced in a statement on Thursday.
Her support clears the way for the bill to pass next week, giving President Joe Biden another major legislative victory ahead of November’s midterm elections.
Sinema had opposed a provision in the bill that would have closed a tax loophole related to hedge fund managers and private equity executives. She also expressed concern about a 15% minimum corporate tax included in the bill. Its business groups had lobbied hard for both measures, arguing it would discourage business investment.
In its statement, Cinema said it plans to reform the investor tax provision, known as carried interest, after the bill is signed into law.
“After this effort, I look forward to working with Senator [Mark] Warner to enact interest tax reforms, protecting investment in the American economy and encouraging continued growth while closing the most egregious loopholes that some abuse to avoid paying taxes.”
The bill will now include a new excise tax on stock buybacks that will bring in far more revenue than the carried interest provision, according to a Democrat familiar with the deal.
The deflation law is substantially more limited than Biden’s original “Build Back Better” proposal, which included paid leave, a monthly child benefit, affordable housing and free community college tuition.
However, its passage would represent a huge victory for Democrats in the middle of the election season.
The bill would allow Medicare to negotiate with the drug industry for lower prescription drug prices, a hugely popular policy change that Democrats have sought for years. It would also invest more than $300 billion in green energy grants and tax incentives and ultimately save the government hundreds of billions by funding tougher enforcement of the Internal Revenue Service.
Democrats expect to begin voting on the bill Saturday under the reconciliation process, which allows them to pass legislation with a simple majority because of its budget implications.
“I am pleased to report that we have reached an agreement on the Inflation Reduction Act that I believe will receive the support of the entire Senate Democratic conference,” Schumer said in a statement Thursday. “The final version of the Reconciliation Bill, to be introduced on Saturday, will reflect this work and bring us one step closer to passing this historic legislation into law.”