Manchin in partial reversal strikes deal on US tax and climate policy Bill

US senator Joe Manchin and Senate majority leader Chuck Schumer have struck a deal on a tax, energy and climate policy Bill, breaking a deadlock on the Democrats’ long-sought legislation to enact major parts of US president Joe Biden’s agenda.

The plan, announced by the two Democrats on Wednesday evening, would generate an estimated $739 billion in revenue, spend $433 billion and reduce deficits by $300 billion.

Revenue would come from the 15 per cent corporate minimum tax, drug price cuts from allowing Medicare to negotiate drug prices, and from increased tax enforcement by increasing the Internal Revenue Service budget. The package would raise $14 billion from taxing carried interest at a higher rate.

Mr Schumer and Mr Manchin in a joint statement said that the text of the Bill would be sent for review to the top Senate rules official and the Senate would vote on it next week.

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The Senate’s parliamentarian must determine if all the provisions comply with Senate budget rules to allow Democrats to pass the Bill with just 50 votes, bypassing a Republican filibuster by using what’s known as the budget reconciliation process.

Mr Manchin said in his own statement he supports increasing IRS enforcement and ending the carried interest tax break that is used by private equity fund managers to cut their tax bills.

He said he backs a 15 per cent domestic corporate minimum tax, which Biden has previously proposed, but that it should only apply the largest US companies that are worth at least $1 billion. Mr Manchin did not make any reference to the 15 per cent global minimum tax that Treasury Secretary Janet Yellen helped broker with nearly 140 countries last year.

But Mr Manchin said he is opposed to expanding the state and local tax, or SALT, deduction that several House Democrats from New York and New Jersey have said is a priority. Mr Manchin said he opposes any tax increases that would put US companies at a disadvantage with their foreign competitors, but did not specify what changes he doesn’t like.

The agreement would provide $369 billion for “energy and climate change according to a one-page summary. Subsidies for Obamacare premiums would be extended for three years.

Every member of the Democratic caucus would need to have for the deal in order for it to pass in the 50-50 Senate, and that has made Mr Manchin, who represents a solidly Republican state, a linchpin negotiations.

Another key Democratic vote is Senator Kyrsten Sinema of Arizona. Asked whether she could support the agreement, a spokeswoman for the Arizona lawmaker said that she has not made a decision yet.

“Senator Sinema will need to review the text, said her press secretary, Hannah Hurley. “We don’t have comment at this time.

The deal represents a partial reversal of Mr Manchin’s position earlier this month when he told Schumer he could not support of package of climate change measure and tax increases because of rising consumer prices after inflation hit 9.1 per cent.

“In practical terms, the Inflation Reduction Act of 2022 would dedicate hundreds of billions of dollars to deficit reduction by adopting a tax policy that protects small businesses and working-class Americans while ensuring that large corporations and the ultra-wealthy pay their fair share in taxes, Mr Manchin said in his statement.

He also said Mr Biden, Mr Schumer and House Speaker Nancy Pelosi had agreed to advance permitting reforms that could benefit fossil fuel producers.

The agreement was announced after the Federal Reserve announced another 75 basis point hike in interest rates and after the Senate approved a $52 billion semiconductor industry subsidy Bill, which Senate Republican Leader Mitch McConnell had only allowed to go forward after Mr Manchin said he would block tax increases. — Bloomberg