WASHINGTON (AP) – Democrats lowered part of their proposed minimum tax on big corporations and made other changes to their giant economic bill, Senate Majority Leader Chuck Schumer said Friday as they moved toward the campaign season win for President Joe Biden. internal agenda
In an unusual nod to closed-door negotiations, Schumer, D-N.Y., said Democrats abandoned a proposal to raise taxes on hedge fund executives after centrist Sen. Kyrsten Sinema, Arizona Democrat, said he would vote “no” otherwise. In its place, Schumer said, the measure now has a new tax, which others said will be 1 percent, on shares that companies buy back from their own stock, bringing the government much more revenue.
“Sen. Sinema said he would not vote for the bill or even vote to begin debate unless the private equity tax was removed from the legislation, Schumer told reporters. “So we had no choice.”
He spoke a day after he and Sinema announced compromise revisions to the environment, health and tax package. With final numbers still to be calculated, the overall measure raises more than $700 billion in revenue, including more robust IRS tax collection, using most of it for energy, climate and health initiatives and reducing federal deficits by $300 billion.
The deal puts Democrats on the brink of a more modest but surprising resurrection of many of Biden’s domestic aspirations that appeal strongly to the parties’ voters. These include taxing big business, curbing prescription drug prices, curbing climate change, helping families pay for private insurance and reducing federal deficits.
In another change, Schumer said a proposed 15 percent minimum tax on large corporations had been cut and would now raise $258 billion over the next decade, down from $313 billion. This provision, which has been the biggest revenue raiser in the legislation, will now allow these companies to pay off their equipment costs more quickly, reducing government taxes and helping manufacturers who buy expensive machinery. The new tax is expected to apply to about 150 companies with revenues of more than $1 billion.
Democrats plan to begin considering the bill in the Senate on Saturday, and the House will return next Friday for a vote. The measure is certain to face unanimous 50-50 Republican opposition in the Senate, where it will need the support of Sinema and other Democrats for passage, 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 raise 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 leader of the Senate GOP. “It’s also the energy to heat the house, 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 desperately needs. And it’s what the Democrats will do in the days ahead.”
The measure will also include money that Sinema and other western senators are seeking to help their states deal with historic drought conditions, Schumer said. Those lawmakers have asked for $5 billion to help address water shortages and wildfires, but it was unclear Friday how much would be included in the bill.
Other changes are still possible. Senate Rep. Elizabeth MacDonough is expected to say soon whether some provisions violate the chamber’s budget procedures and should be deleted. Democrats are using special rules that would allow them to overcome Republican opposition and pass the package without needing the 60 votes most bills require.
The potentially vulnerable provisions include language requiring drugmakers to pay penalties if they raise above-inflation prices for drugs patients receive from private insurers.
The bill faces a long weekend, including a “vote-a-rama” of unlimited, nonstop votes on amendments, which will come mostly from Republicans. Most are destined to lose, though the GOP hopes some will swing Democrats into votes that will create campaign fodder.
Taxing executives at private equity firms such as hedge funds has long been a goal of progressives. Under current law, these executives can pay much less than the top individual tax rate of 37% on their income, which is called “book interest.”
The measure was also a favorite of conservative Sen. Joe Manchin, DW.Va., a longtime holdout against larger versions of Biden’s national plans that helped write the compromise legislation with Schumer.
But progressives also support taxing publicly traded companies to buy back their own shares, a move critics say artificially inflates stock prices and diverts investment money. The buyback tax will generate $74 billion over 10 years, far more than the $13 billion the “carried interest” plan would have raised.
In a breakthrough Thursday night, Sinema said she had accepted changes to the legislation and was ready to “move forward” on the bill. In his own statement, Schumer said he believed the deal “will have the support of all” of the House’s Democratic members.