Senate Dems' deal is no triumph for left-wingers
Senate Majority Leader Chuck Schumer leaves the Senate after passage of the Inflation Reduction Act on Sunday. Credit: For The Washington Post/Shuran Huang
Corporate leaders, big financiers, and Washington lobbyists can rest assured that the Democratic Party doesn’t operate in the grip of strident progressives — despite GOP messaging to the contrary.
Consider all that was excluded from the compromise agreement on climate, drug costs and taxes that Senate Majority Leader Chuck Schumer orchestrated and pushed over his chamber’s finish line.
The deal left unscathed the widely criticized carried-interest tax loophole worth about $14 billion per year. That’s the dubious practice where hedge fund, venture capital and private equity managers pay far less tax on compensation derived from profits than they would for wages or salary. It means some of the wealthiest Americans get to structure their compensation at a 20% tax rate instead of the top 37% some of their own employees pay.
Even business advocates who support continuing to tax those managers’ income as capital gains in this manner — calling it a spur to risk and investment — note that when Republicans were in power, they limited the practice. As a result, fund managers now must hold the portfolio assets in question for three years to qualify for the tax advantage. Before, it was only one year. Recent efforts to make that a five-year requirement have failed.
Blame or credit for this rich perk’s triumph goes to Arizona Sen. Kyrsten Sinema, a pro-corporate Democrat. Her party has a razor-thin hold on the chamber’s majority, allowing Sinema and wealthy conservative Sen. Joe Manchin of West Virginia to exercise outsized influence on legislation, shaping the final compromise.
Last year President Joe Biden, who had promised to roll back his predecessor’s massive corporate tax cuts, apparently couldn’t do so. Corporate rates dropped dramatically, from 35% to 21% under the Republicans, and have stayed there under the Democrats.
The size of the multipurpose package — with its ballyhooed improvements on tax equity, drug costs and environmental protection — shrank considerably.
Progressives are accepting it as the only choice before them. Last week, for example, Sen. Bernie Sanders (I-Vt.) expressed exasperation that the measure would “leave intact virtually all of [ex-President Donald] Trump’s tax breaks for the wealthy and very large corporations.”
Sanders told The New York Times, “It’s a gun to your head . . . Am I disappointed in that? I surely am. On the other hand, what you’ve got to weigh is that the future of the Earth is at stake.” The climate and energy efficiency provisions, he noted, are the biggest action of its kind for the nation so far.
Also on the tax front, Long Islanders who use state and local tax deductions on their federal returns will have to wait before another attempt is made to fully restore the SALT arrangement ditched by the GOP. And Republicans were able to add private-equity carveouts to a new 15% minimum corporate tax.
The Senate agreement now goes to the House, where at least for this season the Democrats retain control.
For electoral purposes, the legislation’s authors clearly hope its enactment will tell voters in the midterms that the current Congress has the ability to function and govern on key issues. The question is what impact their moderate message will have in the fall as Democrats try to fend off prospective Republican victories.
Columnist Dan Janison's opinions are his own.
Dan Janison is a member of the Newsday editorial board.
