WASHINGTON (AP) — Democrats have cut some of their proposed minimum tax on large corporations and made other changes to its gigantic economic bill, Senate Majority Leader Chuck Schumer said Friday, as they moved toward placing a campaign-season win for President Joe Biden on their national agenda.
In a rare glimpse into the closed-door negotiation, Schumer, DN.Y., said Democrats rejected a proposed tax increase for hedge fund executives after centrist Sen. Kyrsten Sinema, D-Arizona, said that otherwise I would vote “no”. Schumer said that instead the measure now has a new tax, which others said will be 1%, on shares that companies buy back from their own shares, generating much more revenue for the government.
“Sen. Sinema said she would not vote for the bill” or even vote to allow debate to begin unless the private equity tax is removed from the legislation, Schumer told reporters. “So we had no choice.”
He spoke a day after he and Sinema announced compromise reviews to the environment, health and tax package. With the final numbers yet to be calculated, the blanket measure raises more than $700 billion in revenue: including stronger IRS tax collections — use most of it for energy, climate and health initiatives and reduce federal deficits by $300 billion.
The deal puts Democrats on the brink of a more modest but surprising revival of many of Biden’s domestic aspirations that strongly appeal to the party’s voters. These include taxing big business, restricting prescription drug prices, curbing climate change, helping families pay for private insurance, and cutting federal deficits.
In another change, Schumer said a proposed 15% minimum tax on giant corporations had been cut and would now raise $258 billion over the next decade, down from $313 billion. That provision, which has been the legislation’s biggest revenue-raiser, will now allow those businesses to depreciate the costs of their equipment more quickly, reducing government tax collections and helping manufacturers who buy expensive machinery. The new tax is expected to apply to some 150 companies with revenues of more than $1 billion.
Democrats plan for the Senate to begin considering the bill on Saturday, with the House returning next Friday to vote. The measure is sure to face unanimous 50-50 Republican opposition in the Senate, where it will need the backing of Sinema and all other Democrats to pass, along with Vice President Kamala Harris’ tie-breaking vote.
“This bill is a game changer for working families and our economy,” Biden said at the White House.
Republicans say the measure will worsen inflation, a top voter concern, discourage businesses from hiring workers and add to already high energy costs with their taxes.
“The pain at the pump is going to get worse, and it’s not just about the cost of energy to drive your car,” said Sen. John Barrasso of Wyoming, the No. 3 Senate Republican leader. “It’s also the energy to heat your home, the energy that powers our country, the energy for electricity.”
Nonpartisan analysts have said the legislation will have a modest impact on inflation and the economy.
“We feel pretty good about it,” Schumer said of the legislation. “It’s what the country so desperately needs. And it is what the Democrats will accomplish in the coming days.”
The measure will also include money requested by Sinema and other Western senators to help their states cope with historic drought conditions, Schumer said. Those lawmakers have sought $5 billion to help address water shortages and wildfires, but it was unclear on Friday how much would be included in the bill.
Still other changes are possible. The Parliamentarian of the Senate, Elizabeth MacDonough, He is expected to say soon whether any provisions violate house budget procedures and should be struck down. Democrats are using special rules that would allow them to overcome GOP opposition and pass the package without needing the 60 votes most bills require.
Potentially vulnerable provisions include language that requires pharmaceutical manufacturers to pay penalties if they raise above-inflation prices for drugs patients get from private insurers.
The bill faces a long weekend, which includes a “vote-a-branch” of unlimited, rolling votes on the amendments, most of which will come from Republicans. Most are destined to lose, though the GOP hopes some will win over Democrats in votes that would create campaign ad fodder.
Taxing the executives of private equity firms, such as hedge funds, has long been a goal of progressives. Under current law, those executives can pay significantly less than the top 37% individual tax rate on their income, called “accrued interest.”
That measure was also a favorite of conservative Sen. Joe Manchin, DW.Va., a longtime opponent of larger versions of Biden’s internal plans who helped draft compromise legislation with Schumer.
But progressives also support taxing publicly traded companies that buy back their own shares, a move critics say artificially raises share prices and siphons money away from investment. The buyback tax will generate $74 billion over 10 years, far more than the $13 billion the “earning interest” plan would have raised.
In a breakthrough Thursday night, Sinema said she had accepted the changes to the legislation and was ready to “move forward” with the bill. In her own statement, Schumer said she believed the deal “will receive the support of all” Democratic members of the House.