What are the details?
The legislation — ironically dubbed the Inflation Reduction Act — advances several key pieces of the progressive agenda, including:
- Raising taxes by instituting a minimum corporate tax rate of 15%, which Democrats estimate will raise just $313 billion of revenue
- Beefing up IRS tax enforcement to raise $124 billion
- Permitting Medicare to negotiation prescription drug prices, raising a projected $288 billion
- Spending $369 billion on “energy security and climate change”
- Closing the so-called “carried interest loophole”
While Democrats celebrated a Manchin-Schumer deal, the legislation presents two new headaches for Democrats: Sen. Kyrsten Sinema (D-Ariz.) and Democrats who want to reserve the $10,000 cap on state and local tax deductions.
The bill is scheduled for a floor vote in the Senate next week, according to Politico, despite the full bill not yet having been distributed to lawmakers for review.
What about Sinema?
Specifically, Sinema opposes ending the tax loophole, which, according to a group of Senate Democrats, “allows investment managers to pay the lower 20 percent long-term capital gains tax rate on income received as compensation, rather than the ordinary income tax rates of up to 37 percent that they would pay for the same amount of wage income.”
NBC News reported that Sinema is the only Senate Democrat who opposes ending the loophole.
A Sinema spokesperson said, “We do not have a comment, as she will need to review the text.”
What about SALT taxes?
The Tax Cuts and Jobs Act, which Republicans passed in late 2017, capped SALT tax deductions at just $10,000 per year. Since then, House Democrats, especially those from New York and New Jersey, have repeatedly urged for the cap to be rolled back.
The Manchin-Schumer bill, however does not touch SALT tax deductions.
“Our tax code should not favor red state or blue state elites with loopholes like SALT and should focus more on closing unfair loopholes like carried interest,” Manchin said in a statement.
It remains to be seen whether Democrats who campaigned on ending the SALT deduction cap will dig in and oppose the bill.