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Sen. Kyrsten Sinema, D-Ariz., has raked in significant amounts of campaign cash from the private equity sector, which notched a victory after she lobbied to remove a billionaire tax loophole from the Inflation Reduction Act as part of her agreement to back the legislation.
The Arizona Democrat announced Thursday that she would “move forward” in supporting the Inflation Reduction Act, the reconciliation package Senate Democrats unveiled last week. As part of the agreement, she successfully removed the carried interest tax provision, which targeted a loophole used by wealthy Americans.
“We have agreed to remove the carried interest tax provision, protect advanced manufacturing, and boost our clean energy economy in the Senate’s budget reconciliation legislation,” Sinema said late Thursday. “Subject to the Parliamentarian’s review, I’ll move forward.”
Sinema’s move is a win for the private equity sector, which pours large amounts of cash into her campaign’s coffers.
Individuals and political action committees from the private equity and investment sector have provided her campaign with $282,650 in donations this election cycle, making her the Senate’s sixth-largest recipient from the industry, according to data compiled by the Center for Responsive Politics.
Meanwhile, Senate Majority Leader Chuck Schumer, who spearheaded the bill, is by far the top darling of the sector. The New York Democrat’s campaign has raked in nearly $1.2 million from individuals and PACs in the industry this cycle. His campaign also tops contributions from those who work for hedge funds by more than $400,000, Center for Responsive Politics data shows.
“I believe strongly in the carried interest loophole. I have voted for it. I pushed for it at first for it to be in this bill,” Schumer told reporters Friday. “Senator Sinema said she would not vote for the bill, not even move to proceed unless we took it out. So we had no choice.”
Sinema’s campaign did not immediately respond to a Fox News Digital inquiry on her private equity donations.
The carried interest provision included in the original reconciliation package would have removed a loophole that allows private equity and hedge fund managers to pay fewer taxes. Wealthy fund managers are able to report income as capital gains, not regular income, dropping their tax rate from 37.9% to 23.8% and potentially saving them hundreds of thousands of dollars, under the little-known tax break.
The loophole would have raised $14 billion in federal tax revenue, according to initial estimates. As part of the negotiations with Sinema, Democrats will tack on a 1% tax on stock buybacks to help pay for the $433 billion legislation.
On Friday, the Chamber of Commerce, the nation’s largest business lobby group, applauded Sinema’s effort to remove the carried interest loophole provision.
“Taxing capital expenditures — investments in new buildings, factories, equipment, etc. — is one of the most economically destructive ways you can raise taxes,” Chamber Executive Vice President and Chief Policy Officer Neil Bradley said. “It punishes innovation, leaves a country poorer and less capable of growing.”
“While we look forward to reviewing the new proposed bill, Senator Sinema deserves credit for recognizing this and fighting for changes,” he added.
Private equity and business groups had argued the provision would have hurt U.S. small businesses most.
“Over 74% of private equity investment went to small businesses last year,” Drew Maloney, the president of private equity interest group the American Investment Council, said in a statement after the bill was unveiled. “As small business owners face rising costs and our economy faces serious headwinds, Washington should not move forward with a new tax on the private capital that is helping local employers survive and grow.”
Karen Kerrigan, the president of the Small Business and Entrepreneurship Council, said the provision would ultimately be absorbed by “ordinary Americans and our nation’s small businesses.”
“Increasing taxes on carried interest means many entrepreneurial firms and small businesses across sectors will not have access to the capital they need to compete, scale, innovate and navigate challenging economic conditions,” Kerrigan told FOX Business last week. “This will only hurt local economies and workers and more broadly undermine U.S. competitiveness.”