Thanks to the 50-50 balance in the US Senate, Democrats Joe Manchin of West Virginia and Kyrsten Sinema of Arizona have much greater leverage over legislation than they deserve and are thus able to force their priorities into legislation that needs to be passed. In the negotiations over the major legislation called the Inflation Reduction Act, what they demanded in return for their support is revealing about whose interests they really care about and it is clearly not the ordinary people of their respective states.
For Manchin it is the fossil fuel industry that he obeys, so he demanded, and got, Biden administration approval for a huge natural gas pipeline in his home state that has been blocked by courts.
For Sinema, it is the venture capitalists that she kowtows to.
In the statement, Sinema indicated that she won several changes to the tax provisions in the package, including removing the provision that would have tightened the carried interest loophole, which aimed to raise the taxes paid by hedge fund and private equity managers. That proposal would have raised $14 billion. She also suggested that she won changes to Democrats’ plans to pare back how companies can deduct depreciated assets from their taxes — a key demand by manufacturers that had lobbied Sinema over their concerns this week.
Thanks to her efforts, these multimillionaire venture capitalists will pay the much lower capital gains tax on much of their income, rather than the rate that ordinary people pay on their income.
It is hard to believe that Sinema used to be a member of the Green party and won her seat to the US House of Representatives in 2012 as a progressive.
In 2000, Sinema worked on Ralph Nader’s presidential campaign. In 2001 and 2002, she ran for local elected offices as an independent and lost. In 2002, The Arizona Republic published a letter from Sinema criticizing capitalism. She wrote: “Until the average American realizes that capitalism damages her livelihood while augmenting the livelihoods of the wealthy, the Almighty Dollar will continue to rule.” She opposed the North American Free Trade Agreement, the World Bank, and the World Trade Organization during this time. In 2003, she protested Joe Lieberman’s unsuccessful 2004 presidential bid, telling the Hartford Courant: “He’s a shame to Democrats. I don’t even know why he’s running. He seems to want to get Republicans voting for him – what kind of strategy is that?”
While in the Green Party, Sinema was its local spokesperson, working to repeal the death penalty and organizing antiwar protests. She had organized 15 antiwar rallies by the time the Iraq War began. She also opposed the war in Afghanistan. During a February 15, 2003, protest in Patriots Square Park in Phoenix, a group led by Sinema distributed flyers portraying a U.S. service member as a skeleton “inflicting ‘U.S. terror’ in Iraq and the Middle East”.
In a 2003 opinion piece, Sinema wrote that Presidents Ronald Reagan and George H. W. Bush were “the real Saddam and Osama lovers”. When asked on a local radio show whether she would oppose someone joining the Taliban and fighting on its behalf, Sinema responded: “Fine … I don’t care if you want to do that, go ahead.” During 2005 and 2006, Sinema co-hosted a radio show with Jeff Farias, a 9/11 truther.
She quickly became one of the most conservative members of the House, a quasi-Republican, and continued that pattern when she entered the US senate in 2018.
Following her election to Congress, Sinema shifted toward the political center, joining the conservative Democratic Blue Dog Coalition and the bipartisan Problem Solvers Caucus and amassing a “reliably moderate-Democratic” voting record. Sinema worked for the adoption of the DREAM Act, even hiring DREAM Act advocate Erika Andiola as a district outreach staffer.
In 2015, Sinema was one of four Democrats to vote to give the Consumer Financial Protection Bureau an advisory role to banks, businesses, and credit unions.
In 2017, Americans for Financial Reform, a progressive nonprofit, found Sinema had voted for 12 of the 19 bills it felt “served the interests or wishes of Wall Street and the financial industry at the expense of the public interest” that year.
The carried interest loophole is an obscure provision in the lax laws that hugely benefits a few very wealthy people and thus is not well known outside of policy wonks. It so narrowly benefits such a few that even Trump did not like it. Every attempt to eliminate it has resulted in fierce backroom lobbying by those wealthy interests to preserve it and it looks like they have succeeded once again, since she is one of the biggest recipients of funding from those interests.
Sinema’s reversal of political positions over time raises questions of whether she was corrupted by the money culture she encountered in Washington or whether her earlier political views were a sham or so shallow that they could shift so easily. Whichever it is, it is clear that she is now very much beholden to the big money interests in Wall Street.
What about the bill itself? This article details its provision, before Sinema’s demand to retain the carried interest loophole whose elimination that would have raised $14 billion in revenue. The bill calls for $485 billion in new spending and $790 in new revenues, resulting in a net reduction in the deficit of $305 billion.
The package includes $386 billion of climate and energy spending and tax breaks – mainly for new or expanded tax credits to promote clean energy generation, electrification, green technology retrofits for homes and buildings, greater use of clean fuels, environmental conservation, and wider adoption of electric vehicles, among other purposes. The package would also increase health care spending by nearly $100 billion, mainly by extending the American Rescue Plan’s temporarily-expanded Affordable Care Act (ACA) premium tax credits for an additional three years, through 2025. Accompanying this new spending would be various regulatory and permitting reforms to help reduce energy costs outside of the reconciliation package.
In addition to the dollar amounts, here are some positive features.
- Creation of a 15% corporate minimum tax rate: Corporations with at least $1 billion in income will have a new tax rate of 15%. Taxes on individuals and households won’t be increased.
- Prescription drug price reform: One of the most significant provisions of the Inflation Reduction Act would allow Medicare to negotiate the price of certain prescription drugs, potentially bringing down the price beneficiaries would pay for their medications. It would also require drug companies to offer customers a rebate for certain medications whose prices increase faster than the rate of inflation.
- IRS tax enforcement: The IRS has been sounding the alarm for years on being underfunded and underperforming. The proposed legislation would invest $80 billion in the nation’s tax agency over the next 10 years.
- Closure of the carried interest loophole: This well-known loophole in the tax code enables investment and private equity fund managers to pay a lower rate on their taxes. The proposed legislation closes this loophole starting in the 2023 tax year. [Note: This feature is what Sinema got removed – Mano]
- Affordable Care Act (ACA) subsidy extension: Currently, medical insurance premiums under the ACA are subsidized by the federal government to lower premiums. These subsidies, which are scheduled to expire at the end of this year, would be extended through 2025. Approximately 3 million Americans could lose their health insurance if these subsidies aren’t extended, according to the U.S. Department of Health and Human Services.
- Energy security and climate change investments: The bill includes numerous investments in climate protection, including tax rebates and credits for households to offset energy costs, investments in clean energy production and tax credits aimed at reducing carbon emissions.
There are still some hurdles to be overcome before the bill becomes law.