After endless negotiations to get Senator Joe Manchin on board with a compromised reconciliation package, the Inflation Reduction Act is now in peril thanks to Arizona Senator (and notorious corporate shill) Kyrsten Sinema.
As Democrats scramble to finalize details of the bill, reports indicate that Sinema is demanding Democrats strip provisions that would limit the scope of the carried interest loophole, which allows wealthy private equity fund managers to cut their tax bills nearly in half.
Sinema’s defense of this indefensible loophole is astounding. The few thousand private equity fund managers who take advantage of the carried interest loophole are some of the wealthiest people on the planet who have been paying less in taxes than working people for decades. They don’t need or deserve any kind of tax breaks.
Sinema is the only Senate Democrat standing in the way of the Inflation Reduction Act’s changes to the carried interest loophole. If reports of her demands are accurate, it’s clear that she has decided to throw her constituents under the bus to posture for a multi-million dollar payout from private equity when she leaves the Senate.
Sinema has spent her entire term in the Senate essentially interviewing for a job with the private equity industry. She’s sold her vote to private equity billionaires, and unless Democrats stand up to her, she’s about to close the deal.
This week, we’ll look at how the carried interest loophole helps some of the richest of the rich get away with murder on Tax Day and why Senator Sinema is willing to sell out on their behalf.
Kyrsten Sinema is Demanding Democrats Keep a Tax Break for the Super-wealthy by Kevin Robillard
Sinema has chosen a bizarre hill to die on with her demands for what’s left of President Biden’s Build Back Better agenda. Considering that the carried interest loophole only impacts a tiny group of ultra-wealthy individuals, closing it should be a no-brainer. But Sinema has been bought off over the years by the fund managers who benefit from it. Sinema raised over $144,000 in 2021 alone from groups who lobby against closing the loophole. It would seem that her demand to keep this tax break around just might have something to do with the fact that her mega-rich campaign donors want it that way.
Sinema’s opposition to closing the carried interest loophole shouldn’t come as a surprise to anyone who’s followed her shady past dealings with private equity interests. In throwback Thursday fashion, we’d like to highlight an article from last year that underscores where Sinema’s interests lie – namely, with her billionaire donors. In 2020, Sinema participated in an “internship” at a winery owned by a private equity baron. Shortly after, she made the winery a stop on her fundraising trail, where she met with dozens of extremely wealthy donors. Apparently, she didn’t feel the need to hide her deep entanglements with the private equity industry then, and she clearly feels the same way now.
The carried interest loophole is so ridiculous that even many of the people who benefit from it believe it should be eliminated. Bill Ackman, a hedge fund billionaire who has made immense amounts of money from carried interest, came out last week in favor of closing the loophole. This typically apolitical billionaire made headlines when he said that the arguments fund managers use to defend the loophole are lies, that the incentive for hedge fund managers and private equity executives wouldn’t be lessened by being taxed at the same rate as other Americans in their tax bracket.
Closing the carried interest loophole might be unpopular with Sinema, but for most of the rest of the Democratic party, it’s clearly a political win that they can throw their weight behind. But while the IRA is a good start, it should go further. As some point out, it only limits the loophole, it doesn’t actually close it. Moving the required holding period from 3 to 5 years leaves a significant amount of the carried interest that private equity fund managers are earning untouched and can hardly be considered “closing” the loophole. If Democrats really want to get serious about tax fairness, they should fully close the loophole or at the very least, increase the holding period far beyond the industry average.