Manchin: Deal’s tax increases won’t hurt businesses, raise prices

Higher taxes on investment fund managers a key piece of the puzzle for West Virginia Democrat

Sens. Joe Manchin III, D-W. Va., and Kyrsten Sinema, D-Ariz., leave the Senate Democrats’ lunch in the Capitol on Tuesday, Nov. 16, 2021.  (Bill Clark/CQ Roll Call file photo)
Sens. Joe Manchin III, D-W. Va., and Kyrsten Sinema, D-Ariz., leave the Senate Democrats’ lunch in the Capitol on Tuesday, Nov. 16, 2021. (Bill Clark/CQ Roll Call file photo)
Posted July 28, 2022 at 4:35pm

West Virginia Sen. Joe Manchin III told reporters Thursday that he’s not talked to fellow centrist Democratic Sen. Kyrsten Sinema of Arizona about the budget reconciliation deal he cut, but he’s hopeful she’ll support it given the bill’s tax increases aren’t inflationary or harmful to most businesses. 

Sinema is withholding comment on the $300 billion deficit-reducing bill that Manchin and Senate Majority Leader Charles E. Schumer crafted behind closed doors and released late Wednesday in a surprise announcement until she’s reviewed the text. But she has long sought to limit the tax increases in the bill, and has reportedly opposed a provision to change the taxation of carried interest that has been added to this package after being left out of recent versions. 

Closing the carried interest “loophole” to tax investment fund managers' share of their clients' capital gains as ordinary income, raising their effective tax rate, has been a long time priority for most Democrats. And Manchin made clear that its inclusion in this bill is a major priority for him.  

“The only thing I was adamant about is the carried interest,” Manchin told reporters on a Zoom call Thursday. “Enough's enough for the one-tenth of 1 percent of the wealthiest people in the country having an advantage. So I’m hoping everybody’s OK.”

Manchin added that "it's not my way or the highway" on the budget package, "but my goodness, on scenarios like that" — referencing carried interest — it was "long overdue to get rid of it."

Senate Democrats huddled Thursday morning to discuss the parameters of the Manchin-Schumer deal but Sinema was not present, according to Sen. Debbie Stabenow, D-Mich. Manchin, who has COVID-19 and is working remotely, did not join either because the room where Democrats met in the Hart Building is not conducive to hosting virtual participants, she said. 

Schumer said at an afternoon press conference that he's hoping the Senate parliamentarian review and "Byrd bath" process, in which the bill is vetted for compliance with the reconciliation rules, will be complete "in the coming days" and the Senate can vote on the bill next week.

But, he acknowledged, "It's going to be hard to do that because it's a shortened timeline with a large bill."

The majority leader also acknowledged that coronavirus-related absences that have plagued his party recently could continue to pose problems next week given all Democrats will need to vote for the reconciliation bill.

"But we're going to have to persevere," Schumer said.

Tax increases excluded

Other than the carried interest provision, the bill excludes most of the tax increases Sinema previously raised concerns about, like corporate and individual tax rate increases.

Manchin and his staff had scrubbed prior versions of the bill to get rid of anything that could be deemed inflation-boosting, although he declined to talk about the specifics of what was removed and why. 

“Let me just say this: They’re not there anymore,” he said. 

But in an interview with West Virginia Metro News’ Hoppy Kercheval Thursday morning ahead of the broader press call, Manchin made note that the agreement did not include a 15 percent global minimum tax. The U.S. and other Organization for Economic Cooperation and Development countries have pledged to implement the global minimum tax, but it has run into problems in other nations and some lawmakers are concerned about the U.S. moving ahead with it in the interim.

“Our international corporations, we didn't do anything that would cause them to be uncompetitive in a global market,” Manchin said. 

Manchin argues the measure doesn’t really raise taxes at all since the carried interest changes only impacts the “extremely wealthy,” and a 15 percent corporate domestic minimum tax in the bill is designed to get large corporations like Amazon that pay little or no tax to start contributing.

“If someone's upset they weren't paying anything, please come forward and tell us why you were able to have this great country protect you and give you these opportunities and you don’t have to pay anything into it,” he said. “I didn't think that was fair."

The corporate minimum tax would apply to corporations reporting income of $1 billion or more and charge a minimum tax based on the earnings they disclose in financial statements for shareholders. It is estimated to raise $313 billion.

The legislative language is similar to a version drafted last year before Manchin shut down negotiations on a much broader $2 trillion-plus reconciliation package. It lacks major new carve-outs, which many on K Street had expected if the levy made it into a final deal. 

How the deal came together

Manchin said Thursday that two weeks ago he told Schumer he was concerned about June inflation data showing a 9.1 percent increase in the consumer price index over a year earlier, and wanted to wait to see if inflation cooled in the July data, which comes out Aug. 10.

Schumer was mad and things “got a little bit hot and hot and heated,” Manchin said. Schumer then asked Manchin if he’d be willing to pass a more narrow bill focused on provisions to allow Medicare to negotiate prices for certain prescription drugs, and Manchin agreed. 

When Schumer announced that Manchin had agreed to a narrow health care-focused bill that would also extend more generous health insurance subsidies but not tax or climate provisions, “all hell broke loose,” Manchin said, equating it to his leadership turning “the dogs” on him.

Manchin took issue with characterizations that he abandoned the negotiations or reversed his positions. 

“I never reversed. I've never been in reverse in my lifetime. And I never walked away,” he said.

Manchin said he saw Schumer the following Monday, July 18, and asked if he was still upset. Schumer told him that he was “very discouraged,” and Manchin responded that he "shouldn't be" because they could "work rationally" to craft a deal that doesn't fuel inflation.

Schumer said Manchin came to him on July 18 to ask to resume negotiations on a broader bill, and that he stipulated he would do so as long as they finished the bill before the August recess.

The duo then got to work on restructuring the bill. They reached final agreement this Tuesday and finalized the text Wednesday, which facilitated their announcement of the surprise agreement and public release of the bill.

The timing of the announcement drew accusations that Manchin and Schumer were trying to pull fast one on Republicans who had just helped Democrats pass a “chips and science” bill that Senate Minority Leader Mitch McConnell only agreed to support after Democrats narrowed their reconciliation ambitions to exclude tax increases and climate measures. 

But Manchin said that was not the case, saying, “There was no malice intended whatsoever.”

The timing, he said, was based solely on the desire to pass a bill before the Senate leaves for its August recess and to give the Senate parliamentarian about a week to review it and listen to Democrats’ and Republicans’ “Byrd bath” arguments about whether the provisions comply with the reconciliation rules.  

While the White House was “kept apprised of what was going on to a certain extent,” Manchin said he deliberately left President Joe Biden out of the negotiations.

“I didn't think it was fair to bring him in,” Manchin said in the Kercheval interview, noting the deal “could have absolutely gone sideways.”

Biden, nonetheless, celebrated the deal in remarks Thursday. 

"The work of the government can be slow and frustrating, and sometimes even infuriating,” the president said. “But then the hard work of hours and days and months for people who refuse to give up pays off. And then history is made, lives are changed."

Laura Weiss and Niels Lesniewski contributed to this report.