With the last standout from Senate Democrats – Arizona Sen. Kyrsten Sinema – tentatively signing an amended $739 billion reconciliation deal, her party leaders are eagerly awaiting a first procedural vote on their landmark bill on taxes, climate and drug prices. from Saturday.
The Senate is expected to finally pass the Cut Inflation Act of 2022 using an expedited budget process known as reconciliation as early as this weekend. If all Democrats pull together, they will be able to eliminate the massive legislative package by their very narrow majority and avoid a Republican filibuster threat.
In a surprise move in late July, West Virginia Sen. Joe Manchin announced he had brokered a deal on a revised version of a Democrat-only spending bill with Majority Leader Chuck Schumer after it seemed that the door was closed to negotiations.
After reviewing the legislation, Sinema on Thursday evening offered him essential but still conditional support for the bill. His support was conditional on Democrats stripping the bill of a tax break favoring wealthy hedge fund managers called the “carried interest loophole,” while instead adding a new excise tax on redemptions. of shares.
The currently proposed text aims to increase job creation, raise taxes on big business and the mega-rich, allow the government to negotiate prescription drug prices to cut costs, expand the health care program by the Affordable Care Act and invest in the fight against climate change with moderation. such as extending tax credits for clean energy initiatives.
Together, the climate provisions and the ACA would cost the government about $433 billion, and Democrats plan to spend at least $300 billion on deficit reduction. The tax provisions, prescription drug pricing reform and increased enforcement of IRS taxes would increase the estimated revenue the bill would generate to $739 billion.
Republicans have criticized the proposal, saying any tax increases or spending programs as the country falls into an economic recession are irresponsible.
“It’s not about cutting inflation, it’s about Democrats spending on things they want to spend money on. I’m not going to support it. I don’t think any Republican “Why is that? Well, it’s another tax and spending bill,” Utah Sen. Mitt Romney said in response to the bill.
Tax analysts argue the legislation would help American families earning less than $400,000. Democrats say that would reduce inflation at least in part by reducing the deficit, a key priority for Manchin.
The bill would reduce federal budget deficits by $102 billion over 10 years, according to the nonpartisan Congressional Budget Office.
“The legislation would reduce or have no effect on taxes owed or paid by any family with an income below $400,000 and is fully in line with the President’s commitment. In fact, tax credits for clean energy and the expanded bonus tax credit will reduce taxes for millions of Americans,” Treasury Secretary Janet Yellen wrote in a letter to congressional leaders.
Sinema said she is still waiting to see the results of a cleanup by the Senate’s nonpartisan rules keeper before signing on, but if Schumer can keep her caucus together and pass this bill, it will be a big win for Democratic leaders ahead of an upcoming hotly contested midterm cycle.
“We have agreed to remove the deferred interest tax provision, protect advanced manufacturing and boost our clean energy economy in the Senate budget reconciliation legislation,” the Arizona senator said in a statement. . “Subject to parliamentary review, I will move forward.”
Details of the reconciliation bill were highlighted on Thursday as lawmakers continued to sift through the more than 700 pages of legislation ahead of votes this weekend. Once the Senate votes to begin debate on the bill, lawmakers will have the ability to propose any number of amendments, a cumbersome and time-consuming process.
Here’s what the bill contains among Democrats’ top priorities: the economy, the environment and health care.
New proposal will invest $300 billion in ‘deficit reduction’, backers say, making ‘biggest corporations and the ultra-rich pay their fair share’ and providing funds to improve enforcement IRS taxes.
But some of the Democrats’ most ambitious efforts to tax the ultra-rich have been sidelined by Sinema’s insistence that so-called “carried interest” tax breaks for wealthy hedge fund managers and executives of private equity are maintained.
The original bill sought to close this carried interest loophole by extending the holding period and thus forcing investors to hold on to their assets longer — a move Wall Street adamantly fought against.
Sinema has requested amendments to the Inflation Reduction Act specifically to remove the “interest-bearing” loophole provision.
“Senator Sinema said she wouldn’t vote for the bill, wouldn’t even move to move forward, unless we took it down. So we had no choice,” Schumer said at a press conference on Friday.
In his statement late Thursday, Sinema left the door open for future talks on changing the carried interest tax.
“Following this effort, I look forward to working with Senator Mark Warner to enact deferred interest tax reforms, protect investments in the U.S. economy, and encourage continued growth while closing the most glaring loopholes. which some abuse to avoid paying taxes,” she said in a statement. Thursday evening.
Changes to secure Sinema’s support also included reducing a proposed minimum corporate tax of 15% by preserving the ability for manufacturers to quickly deduct capital purchases. Proposed changes to depreciation policies have raised concerns among some Republicans that the IRA will hit manufacturers disproportionately.
“We remain skeptical and will carefully review the revised legislation,” National Association of Manufacturers President and CEO Jay Timmons said in a statement. “We cannot afford to undermine the competitiveness of manufacturing.”
The proposed minimum corporate tax still only applies to large corporations.
But while Democrats suffered a loss of revenue to meet Sinema’s demands, they made up for it with the addition of a provision aimed at investors – a new 1% excise tax on stock buybacks. which would require companies to pay on the amount of shares they buy back.
Schumer said that excise tax would ensure the package still reduced the federal deficit by up to $300 billion, the same amount Democrats were aiming for in the original deal and a key priority for Manchin.
“We’re adding an excise tax on stock buybacks that will raise $74 billion,” Schumer said.
Chuck Marr, vice president of federal tax policy at the Center on Budget and Policy Priorities, in a Twitter thread, called the tax “great policy,” designed to fix tax policy inefficiencies, and “raises $125 billion.” dollars over ten years”.
Most of the $369 billion the Cut Inflation Act would spend on climate would go to renewable energy tax credits that would support clean energy technologies such as carbon capture, hydrogen, renewable energy and energy storage. The climate provisions would also provide consumption tax credits for “home energy efficiency improvements” and for the purchase of clean vehicles.
Proponents say the package would cut around 40% of the country’s carbon emissions by 2030.
The bill includes a methane emissions reduction program, a series of reforms that would dramatically impact federal onshore and offshore oil and gas royalty rates and reverse a 10-year moratorium on offshore wind leasing established by the United States. former President Donald Trump, among other provisions.
Democrats are also excited about the bill’s significant funding initiative — $60 billion in total — for environmental justice projects.
Sinema requested a $5 billion increase in the bill’s spending for drought resilience funding on top of the $575 million already listed in the bill that would go to the Bureau of Reclamation for response and drought preparedness and $13 million for drought relief for tribes.
On Friday, Sinema’s colleague in Arizona, Mark Kelly, announced an agreement to include $4 billion in resources to fight conscription in the western United States in the bill.
Health care, prescription drug prices
In addition to climate spending, the reconciliation bill would also allocate $64 billion to extend expiring Affordable Care Act grants by three years to 2025.
It also seeks to undo a longstanding Democratic goal of lowering prescription drug prices for seniors by allowing Medicare to directly negotiate drug prices.
“The new negotiation policy will ensure that Medicare patients get the best possible deal on high-priced drugs and pay cost-sharing for those drugs based on the Medicare-negotiated price,” according to the bill’s summary. .
The bill would also cap out-of-pocket costs at $2,000 for those using Medicare drug plans, with the ability to divide that amount into affordable monthly payments. Currently, no cap exists.
It would also impose penalties on drug companies if they raise prices faster than inflation, prompting them to keep prices low and expand premium and co-payment assistance for prescription drugs for people with low income.
“Although we are not there yet, we are about to take the most important step we can take – helping Congress to help us reduce inflation, the reduction act inflation,” Biden said in a speech at the White House. on Friday, touting the Democrats’ victories on health care, among other climate and fiscal victories.
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