WASHINGTON (AP) — Democrats have cut some of their proposed minimum corporate tax and made other changes to their gigantic economic bill, Senate Majority Leader Chuck Schumer said Friday, as they headed for a campaign season victory over President Joe Biden on his domestic agenda.
In an unusual look at closed-door negotiations, Schumer, DN.Y., said Democrats dropped a proposed tax hike for hedge fund executives after D-Ariz. central centrist senator Kyrsten Sinema said she would vote “no.” Schumer said instead, the measure now has a new tax — which others said will be 1% — on the shares companies buy back from their own stock, bringing much more revenue to the government.
“Sen. Sinema said she would not vote for the bill “or even vote for the debate to begin 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 on the environment, health care and the tax package. With final figures yet to be calculated, the total measure will bring in more than $700 billion in revenue – including more robust IRS tax collections — use most of it for energy, climate and health initiatives and reduce federal deficits by $300 billion.
The accord places Democrats on the brink of a more modest but striking resurrection of many of Biden’s domestic aspirations that strongly appeal to party voters. Those include taxing large corporations, limiting prescription drug prices, slowing climate change, helping families pay for private insurance and curbing federal deficits.
In another change, Schumer said a proposed 15% minimum tax on mammoth companies had been reduced and would now bring in $258 billion over the next decade, down from $313 billion. That provision, which has been the legislation’s biggest source of revenue, will now allow those companies to write off their equipment costs more quickly, reduce government taxes and help manufacturers buy expensive machines. The new tax is expected to apply to about 150 companies with incomes in excess of $1 billion.
Democrats plan to let the Senate consider the bill on Saturday, and the House will return to vote next Friday. The measure is sure to meet with unanimous Republican opposition in the 50-50 Senate, where the support of Sinema and all other Democrats will be needed for approval, along with the casting vote of Vice President Kamala Harris.
“This bill is a game changer for working families and our economy,” Biden said at the White House.
Republicans say the measure will exacerbate inflation — a primary concern of voters — discouraging companies from hiring workers and raising already high energy costs with taxes.
“The pain at the pump is going to get worse, and it’s not just about the energy costs to drive your car,” said Wyoming Sen. John Barrasso, the No. 3 Senate GOP leader. “It’s also the energy to heat your home, energy that powers our country, energy for electricity.”
Unbiased analysts have said the legislation will have a modest effect on inflation and the economy.
“We feel pretty good,” Schumer said of the legislation. “That’s what the country needs so badly. And that’s what the Democrats will deliver in the coming days.”
The measure also includes money Sinema and other Western senators are seeking to help their states deal with historic drought, Schumer said. Those lawmakers have asked $5 billion to address water scarcity and wildfires, but it was unclear Friday how much would be included in the bill.
Other changes are possible. The Senate MP, Elizabeth MacDonough, is expected to say shortly whether some provisions are inconsistent with the chamber’s budgetary procedures and should be deleted. Democrats are using special rules that allow them to overcome GOP opposition and pass the package without the 60 votes most bills require.
Potentially vulnerable provisions include language requiring pharmaceutical manufacturers to pay fines if they raise prices above inflation for drugs patients receive from private insurers.
The bill faces a long weekend, including a “vote-a-rama” of unlimited, non-stop votes on amendments, which will come mostly from Republicans. Most are destined to lose, though the GOP hopes some will put Democrats in votes that would create campaign ad fodder.
Taxing 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 highest individual tax rate of 37% on their income, called “carried interest.”
That measure was also a favorite of Conservative Senator Joe Manchin, DW.Va., long steadfast against bigger versions of Biden’s domestic plans that helped write the compromise legislation with Schumer.
But progressives also support taxing publicly traded companies that buy back their own shares, a move critics say is artificially inflating stock prices and taking money away from investments. The repurchase tax will bring in $74 billion in 10 years, far more than the $13 billion the “carried interest” plan would have raised.
In a breakthrough Thursday night, Sinema said she had agreed to changes to the legislation and was ready to “move forward” with the bill. In his own statement, Schumer said he believes the agreement will have “the support of the entire” Democratic membership of the chamber.