In a statement, Sinema indicated that she won several changes to the tax provisions of the package, including removing the tax on carried interest, which would have impacted hedge fund managers and private equity. That proposal would have raised $14 billion.
“We have agreed to remove the carried interest tax provision, protect advanced manufacturing, and boost our clean energy economy in the Senate’s budget reconciliation legislation,” Sinema said. “Subject to the Parliamentarian’s review, I’ll move forward.”
Sinema’s support is critical given that all 50 Republicans will oppose a plan they argue would hurt the economy and cost far more than Democrats are contending — so any one Democratic defection could sink it.
As CNN earlier reported, Democrats agreed to add an excise tax on companies’ stock buybacks as part of the agreement.
“The agreement will include a new excise tax on stock buybacks that brings in far more revenue than the carried interest provision did, meaning the deficit reduction figure will remain at $300 billion,” a Democrat familiar with the agreement told CNN.
The $300 billion target in deficit reduction had been a key priority of Sen. Joe Manchin, whose agreement to the deal last week revived the legislation.
“The agreement preserves the major components of the Inflation Reduction Act, including reducing prescription drug costs, fighting climate change, closing tax loopholes exploited by big corporations and the wealthy, and reducing the deficit by $300 billion,” Senate Majority Leader Chuck Schumer said in a statement. “The final version of the Reconciliation bill, to be introduced on Saturday, will reflect this work and put us one step closer to enacting this historic legislation into law.”
High stakes negotiations
Earlier Thursday, top Senate Democrats engaged in high-stakes negotiations with Sinema, actively discussing potential changes to major tax components in order to secure the Arizona moderate’s support.
In private discussions, Sinema had expressed concern over key parts of the Democrats’ plan to pay for their climate and health care package — imposing a 15% tax minimum tax on big corporations and taxing so-called carried interest, which would mean imposing a new levy on hedge fund managers and private equity.
As a result, Democrats had been scrambling to find new revenue sources to meet the goal of saving $300 billion over a decade.
“Failure is not an option,” said Sen. Richard Blumenthal, a Connecticut Democrat, expressing the view of much of his caucus earlier Thursday that Sinema would eventually get on board.
It’s unclear when the parliamentarian, Elizabeth MacDonough, will announce her decision on the package. A Democratic aide told CNN that the Senate Finance Committee’s energy provisions — most notably the clean energy credits — are scheduled to go in front of the Senate parliamentarian on Friday.
It’s not clear if all these provisions will survive the parliamentarian’s review.
Heavy pressure on Sinema
Sinema was not part of the deal, learning of it when the news broke last week. She had refused to comment publicly on the deal, with her aides only saying she would wait until the Senate parliamentarian’s review is done before taking a position. Yet she had been making her demands clear with Democratic leaders, including seeking to add $5 billion to help the Southwest cope with its multi-year drought, according to multiple sources.
“Is this written in a way that’s bad?” Sinema asked, according to Seiden, president of the Arizona Chamber of Commerce, who relayed the call to CNN.
“It gave me hope that she’s willing to open this up and maybe make it better,” Seiden said.
Two sources told CNN that Sinema had privately relayed those concerns to top Democrats, arguing it would hurt manufacturers including in her state.
At issue are changes proposed by Democrats on bonus depreciation that the GOP enacted in the 2017 tax law, which allows companies to deduct 100% of the cost of an asset the year it is placed in service. The new legislation proposes to phase that down starting next year.
Defending the new tax, the Democratic-led Senate Finance Committee released date on Thursday from the non-partisan Joint Committee on Taxation showing that up to 125 billion-dollar companies averaged only a 1.1 percent effective tax rate in 2019. The committee argues in its release that this shows the “rock-bottom tax rates” that some companies are able to pay.
“While we know that billion-dollar companies are avoiding paying their fair share, these tax rates are lower than we could have imagined,” said Senate Finance Chairman Ron Wyden, an Oregon Democrat. “We’re going to put a stop to it with our 15 percent minimum tax.”
This story and headline have been updated with additional developments Thursday.
CNN’s Jessica Dean, Ella Nilsen, Clare Foran and Alex Rogers contributed to this report.