West Virginia Sen. Joe Manchin (D) said Thursday he is standing firm on keeping a proposal to close the so-called carried interest tax loophole in the tax and climate deal he reached this week, despite potential opposition from fellow centrist Sen. Kyrsten Sinema (D-Ariz.).
Closing the tax loophole has long been a goal of Democratic tax reformers, but it was dropped out of the House tax bill last year after Sinema indicated she opposed ending the tax break.
This dynamic has prompted a storm of speculation about whether the Arizona senator will withhold her support for Manchin and Senate Majority Leader Charles Schumer’s (D-N.Y.) Inflation Reduction Act, which became public Wednesday.
Sinema’s office has so far declined to comment on the legislation. She did not attend a Senate Democratic caucus meeting Thursday to discuss the deal.
But Manchin on Thursday told reporters that he will insist on keeping the carried interest provision in the bill, arguing that it’s unfair for asset managers to only pay a 20 percent capital gains tax rate on income they earn from the profits of managed investments.
“I’m not prepared to lose” it, Manchin said. “What we have is a good bill that’s fair with everybody. It’s a give and take proposition.
“My goodness, on scenarios like that — I think the people that have benefited from carried interest for years and years and years knew that they had a good run, it was long overdue to get rid of it and you can’t justify it anymore,” he said.
Some Democrats have fought to close the carried-interest loophole for years, arguing it allowed wealthy money managers to effectively pay lower tax rates than working-class Americans.
Manchin said asset managers aren’t risking their own capital, but instead receiving a fee or income for a service provided to someone else, just like most other jobs for which people have to pay regular income tax.
“How in the world can you take advantage of someone who has their capital at risk, basically their money at risk and all you do is have your time involved and you’re going to get same benefits they do?” he argued. “None that of that makes sense.”
Manchin defended the deal as “a good piece of legislation” and expressed hope that Sinema would support it.
A spokeswoman for Sinema said her boss is reviewing the text of the bill and had no comment.