Democrats took a big step forward on Joe Biden’s flagship climate, tax and healthcare legislation on Thursday night after Kyrsten Sinema, the Senator from Arizona, expressed support for the plan following days of heated intraparty negotiations.
Sinema’s backing was clinched after a last-minute change to the bill introducing a 1 per cent excise tax on share repurchases by large companies. A measure cracking down on preferential treatment of private equity and hedge fund profits known as “carried interest” was scrapped.
“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 $300bn,” said a Democrat familiar with the talks.
The deal paves the way for the first procedural vote on the bill in the upper chamber of Congress as soon as Saturday, with final passage in the Senate possible by the end of the weekend before it is taken up by the House of Representatives. Biden said he looked forward to the Senate considering the bill soon.
If enacted, the bill would invest $369bn in clean energy incentives designed to boost the fight against climate change, as well as measures to lower the cost of prescription drugs by empowering the government to negotiate prices. It would also impose a 15 per cent minimum tax on large corporations, helping reduce the budget deficit by $300bn over the next 10 years.
The plan is smaller and much less ambitious than Biden’s original Build Back Better legislation, worth $3.5tn, which failed to pass Congress last year amid divisions between moderate and progressive Democrats.
But it would still represent a big legislative victory for the president and Democrats heading into the midterm elections in November, when they are facing an uphill battle to protect slim majorities in the House and Senate.
“I am pleased to report that we have reached an agreement on the Inflation Reduction Act that I believe will receive the support of the entire Senate Democratic conference,” Chuck Schumer, the Senate majority leader, said in a statement. “I have had many productive discussions with members of our conference over the past three days and we have addressed a number of important issues they have raised.”
In her statement, Sinema said she would “move forward” with the bill after agreeing to “remove the carried interest provision, protect advanced manufacturing and boost our clean energy economy”. The legislation is fiercely opposed by corporate America and congressional Republicans, who have criticised it for being an extension of Biden’s 2021 spending policies that they blame for overheating the economy.
Sinema also secured a concession from Democrats to exempt write-offs for certain capital investments, known as accelerated depreciation, from the minimum tax, a top priority for business. But Jay Timmons, the president of the National Association of Manufacturers, wrote on Twitter that he remained “sceptical” of the package.
The deal with Sinema followed an agreement Schumer reached last month with Joe Manchin, the West Virginia senator and another Democratic holdout.
With Republicans united in opposition, the legislation’s passage will require every Democrat in the evenly divided Senate to vote in favour, with Kamala Harris, vice-president, casting the deciding vote. It would then need to pass the House in order to be signed into law by Biden.