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Sen. Kyrsten Sinema (D-Ariz.) received more campaign contributions in the last three months than in any quarter since she became a senator. (Photo: Chip Somodevilla via Getty Images)

Sinema Shatters Democrats' Plan to Raise Corporate Tax Rate

Although "all of President Biden's Build Back Better agenda can be paid for by fairer taxes on the wealthy and corporations," noted Americans for Tax Fairness, Sen. Kyrsten Sinema's refusal to support tax hikes on the rich could kill the bill.

Kenny Stancil

Thanks to the intransigence of right-wing Democratic Sen. Kyrsten Sinema of Arizona—who has refused to support proposed tax hikes on corporations and wealthy individuals to pay for her party's social infrastructure and climate package, all while taking tens of thousands of dollars from Wall Street—President Joe Biden on Wednesday shelved his long-standing and popular tax reform plan and is reportedly considering potential alternatives.

"Many Democrats would rather not dance around their goals by enacting more complicated proposals than those Sinema has rejected," Politico reported Wednesday. "But they may have no other choice: Democrats said she's the primary, and in some cases sole, impediment to raising the rates they've been campaigning against for years."

Even Sen. Joe Manchin (D-W.Va.)—another conservative swimming in corporate cash who has competed with Sinema for the title of the biggest obstacle to the Build Back Better Act and played a key role in cutting it by almost half—has advocated for slightly higher tax rates on corporations, individuals with annual incomes over $400,000, and capital gains.

But Sinema has opposed her party's attempts to undo Trump-era tax cuts for the rich, even though she voted against the 2017 law and campaigned against it in 2018.

The GOP's 2017 tax law slashed the corporate tax rate from 35% to 21%, costing the federal government vast sums in lost revenue at a time of worsening inequality. House Democrats, deviating slightly from Biden's call earlier this year for a 28% corporate tax rate, have proposed raising the rate to 26.5% for companies generating more than $5 million per year—still far lower than it was just five years ago. Manchin, for his part, has pushed for a corporate tax rate of 25%.

Following Biden, House Democrats have also proposed increasing the individual income tax rate from 37% to 39.6% for those earning more than $400,000 per year, or $450,000 for married couples; increasing the top capital gains rate from 23.8% to 28.8%; and levying a 3% surtax on income above $5 million.

However, the Wall Street Journal reported Wednesday that Sinema "has told lobbyists that she is opposed to any increase" in tax rates on "businesses, high-income individuals, or capital gains."

Due to Sinema's opposition to those modest reforms—which would raise nearly $850 billion in revenue over a decade to fund child care and universal pre-kindergarten, an expansion of Medicare, climate action, and other vital public investments—Democratic Party leaders are now "working behind the scenes to target the wealthy and corporate America without crossing what increasingly appears like a red line" to the lawmaker from Arizona, Politico reported.

With the White House, Senate Majority Leader Chuck Schumer (D-N.Y.), and House Speaker Nancy Pelosi (D-Calif.) seeking swift passage of the legislation through the budget reconciliation process—which is immune to the filibuster but requires the support of all 50 of the caucus' senators—"Democrats need to choose, quickly, to keep trying to convince Sinema or to craft workarounds that she can accept," Politico noted.

According to the news outlet:

Among the options under discussion to satisfy Sinema include targeting hundreds of billionaires who don't pay taxes on their unrealized gains—a move that's known as "mark to market." Party leaders are also discussing taxing stock buybacks, installing a minimum corporate tax, and focusing more on international corporate tax reform. They also believe they can raise significant revenue through increased IRS enforcement and closing tax loopholes.

White House spokesperson Andrew Bates said Wednesday in a statement that "there is an expansive menu of options for how to finance the president's plan to ensure our economy delivers for hardworking families, and none of them are off the table."

However, the Associated Press reported Thursday that "under the changes being floated, [the] 21% corporate rate would stay the same," citing an unnamed source familiar with private discussions between Biden administration officials and congressional leaders.

In addition, Pelosi told reporters Thursday that paying for the Build Back Better Act without increasing taxes on high earners is a possibility.

That could be a deal-breaker for congressional progressives, as Politico explained:

Senior House Democrats said it's unclear if a bill that doesn't raise tax rates could even win the votes to clear the chamber, where Speaker Nancy Pelosi can only lose three members on any given bill. The issue makes a handful of the most vulnerable House Democrats queasy but is otherwise widely embraced by the caucus, especially influential progressives who say "taxing the rich" should be a no-brainer for the party.

Progressive advocates are amplifying calls to raise taxes on the wealthy, especially in light of the fact that the combined net worth of the nation's 745 billionaires has skyrocketed by $2.1 trillion during the past 19 months of the Covid-19 pandemic.

Americans for Tax Fairness on Wednesday issued a reminder that "all of President Biden's Build Back Better agenda can be paid for by fairer taxes on the wealthy and corporations."

New York magazine, meanwhile, argued that Sinema's attempt to prevent tax hikes on the rich could deal "a death blow to Biden's social agenda."

The media outlet added:

Senate rules require that creating or expanding any social program—healthcare, child care, education, or anything else—can only be made permanent if it has some funding source. If Sinema refuses to support any tax increases on the wealthy, there's no financing available to come anywhere close.

Biden's plan does have some other funding. One stream of income is beefed-up enforcement of taxes owed by the Internal Revenue Service. That plan is under pressure from centrist Democrats and likely to exist in shrunken form, if at all. The other is a proposal to allow Medicare to negotiate the cost of prescription drugs, which would save half a trillion dollars over a decade that could be used to cover new spending. But Sinema reportedly opposes that, too.

Sarah Anderson, director of the Global Economy Project at the Institute for Policy Studies, and Brian Wakamo, a researcher at the progressive think tank, on Wednesday explained five proposals for taxing wealth to pay for the social investments in the Democratic Party's reconciliation package.

"In the Build Back Better negotiations, lawmakers must stand up to pressure from lobbyists for the ultra-rich and embrace taxes that make a serious dent in the massive fortunes of those at the top of our economic ladder," the pair wrote. "Without tackling obscene wealth inequality, we cannot create an equitable economy that serves all Americans."

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