WASHINGTON (AP) — Democrats have cut some of their proposed minimum corporate tax and made other changes to their massive 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 is 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 order 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 approximately 150 businesses with incomes over $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 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.
Other revisions are possible. But the package passed one hurdle when Senate MP Elizabeth MacDonough said a provision could remain in place requiring union-level wages to be paid if energy efficiency projects qualify for tax credits.
She maintained another section limiting tax credits for electric vehicles to those assembled in the US that contain batteries with minerals from countries with which the US has free trade agreements.
“I am especially pleased that our applicable wage regulations have been approved. These provisions guarantee wages for clean energy projects,” Ron Wyden, D-Ore, chairman of the Senate Finance Committee, said early Saturday.
Democrats awaited the MP’s decision on other issues, including requiring pharmaceutical manufacturers to pay fines if they raise prices above inflation for drugs patients receive from private insurers.
Democrats are using special rules that allow them to overcome GOP opposition and pass the package without the 60 votes most bills require. Under those procedures, the MP can force the removal of provisions that violate rules that require them to focus primarily on modifying the federal budget and not on making new policies.
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 house, 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.”
According to Sens. Mark Kelly, D-Ariz., Catherine Cortez Masto, D-Nev., and Michael Bennet, D-Colo, the measure also includes $4 billion that Western senators seek to help their states cope with disastrous drought conditions. The group had requested $5 billion.
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 “interest borne.”
That measure was also a favorite of Conservative Senator Joe Manchin, DW.Va., long steadfast against larger 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.