You may have read or heard about the bill just passed by the Senate known as the Inflation Reduction Act. The bill passed on a 51 to 50 vote with Vice President Harris casting the deciding vote. Every Republican voted “No.”. The House then passed the bill and the President signed it with some degree of fanfare.
The bill combines many worthy objectives including measures intended to combat climate change, lower the cost of prescription drugs and a minimum corporate tax that is intended to force major corporations to pay something in taxes. The bill is helpful, a decent start, but doesn’t go far enough because Democrats had to water down the bill to please two Senators of their own party who were holding the bill hostage. But, this is not intended as a critique of the bill. Rather, this is about the leverage two so-called Democrats use to benefit themselves and the corrupting influence of lobbyists and special interests.
The first is Joe Manchin of Kentucky. Manchin is supposed to be a Democrat, but he comes from a Red state. His family wealth is directly attributable to coal, i.e., he’s in the coal business, and, of course, some of his voters work in the coal industry, own coal companies or own businesses that rely on the coal industry. Although the coal business has been declining in Kentucky and the U.S. for many years, Manchin’s financial self -interest and loyalty to the coal industry has led him to oppose climate legislation for years. He has also sided with Republicans on enough issues that his vote has become absolutely essential to the passage of each and every bill. Manchin’s leverage (power) and national notoriety far exceeds that which a Senator from a backwater state would be expected to have. But for the 50/50 split in the Senate, Manchin would be just another Senator or become a Republican. He has used his de facto veto power to enrich himself and his friends at the expense of the Nation, but his ploy for political power has also had another bad effect: the creation of a copycat, Krysten Sinema of Arizona.
Arizona is a battleground state. Sinema could make the argument that she needs to be careful about voting with her party in order to stay in office, but she fails to realize that Republican voters will vote against her no matter what she does. And, in this instance, her motive to threaten the passage of the bill seems less than honorable.
The bill that passed is, in part, a tax bill. One of the tax provisions had to do with taxing so-called “carried interest” at a higher rate. This would have had a big impact upon those who make big money by putting together deals for investors and get paid by receiving a percentage of the profit. As tax law now stands, these people are taxed at 15%, the capital gains rate, even though they usually don’t have their own money invested and don’t qualify for capital gains treatment. In other words, they pay taxes at a much lower rate than you and I do on our ordinary income even though their income, their compensation, is really no different than yours or mine. This special treatment of carried interest income was a part of the George Bush tax cuts that continue to help the rich and corporations and increase our budget deficit.
Needless to say, lobbyists went straight to work to kill the provisions of the bill that increased the tax rate for these wealthy people. According to news reports, Sinema accepted around $2,000,000 in political contributions from the special interest groups affected by the bill. It was then no surprise that Sinema refused to vote for the bill unless the tax treatment for carried interest was deleted. Was this a quid pro quo? It sure looks that way.
Clearly, Manchin and Sinema enjoy the limelight, the power and the money that have come their way by playing this double game, but when the political winds change and neither side needs them, they will be remembered for what they did and didn’t do now.