Schumer defends dropping interest tax changes to win over Sinema

Written by Javed Iqbal

Senate Majority Leader Charles Schumer (DN.Y.) says he had no choice but to remove a provision closing the so-called carry interest tax loophole for money managers from his climate and tax reform bill because Sen. Kyrsten Sinema (D-Ariz. ) threatened to block the legislation otherwise.

Dropping the interest tax provision from the Inflation Reduction Act cost $14 billion in expected revenue, but Schumer made up for it by adding an excise tax on stock buybacks that will generate $74 billion in revenue.

Schumer told reporters he was pushing hard to close the carried interest tax loophole, which allows wealth managers to pay a lower effective income tax rate than many middle-income Americans, but Sinema told him she would not vote to begin the debate unless he dropped it. determination.

“I strongly believe in the loophole, I’ve voted for it, I’ve pushed for it, I’ve pushed for it to be in this bill,” he said. “Sen. Sinema said she would not vote for the bill, not even move forward, unless we took it out, so we had no choice.”

The Wall Street Journal reported that Sinema told donors at a campaign fundraiser Wednesday night that it would be bad policy to hit the private equity industry with an increase in carried interest taxes at a time when the industry will be needed to finance infrastructure projects and semiconductor manufacturing.

However, other Democrats, including Sen. Joe Manchin (W.Va.), point out that ending the carrying rate loophole would affect asset managers who advise on investments, not the investors who put their own money to finance a project or company. Under the loophole, money managers pay a capital gains rate of 20 percent and a net investment tax of 3.8 percent on the income they earn by advising on a profitable investment.

Schumer also noted that he reshaped the 15 percent minimum tax to address Sinema’s concerns that it would hit manufacturing companies.

The Democratic leader said he agreed to take out “two pieces” of the company’s minimum tax provision, lowering the amount of revenue it will raise from $313 billion to $258 billion over the next decade.

But he said the revenue loss will also be offset by applying the 1 percent excise tax on share buybacks.

“What we added is something that excites me and I think it excites all Democrats and especially progressives. We’re adding an excise tax on stock buybacks that will bring in $74 billion,” Schumer said.

“I hate share buybacks. I think they are one of the most self-serving things that companies in the United States do,” he said. to reduce the number of shares. They are despicable,” he added.

Asked when the effective date of the excise tax would be, Schumer said he would provide more information at a later date.

Sinema touted the removal of the carrying interest provision in a statement Thursday night.

Schumer said Democrats will try to pass the bill “as quickly as we can,” but pointed out that there are various tactics Republicans can use to slow the bill.

But he predicted the bill would have the support of all 50 Democrats to pass sometime in the next few days.

“I am pleased that we have reached an agreement on the Inflation Reduction Act, which I believe will receive the support of the entire Senate Democratic Conference,” he said.

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Javed Iqbal

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