For Sinema, it’s taxes vs. climate

By Adam Aton, Corbin Hiar | 08/02/2022 06:31 AM EDT

The Arizona centrist has been mum on whether she’ll support Democrats’ historic climate bill. It includes some tax provisions that she’s opposed in the past.

Sen. Kyrsten Sinema (D-Ariz.) reviewing notes outside the U.S. Capitol in March.

Sen. Kyrsten Sinema (D-Ariz.) reviewing notes outside the U.S. Capitol in March. All eyes are on Sinema as Democrats look to advance a massive spending package that would invest heavily in a response to climate change. Francis Chung/E&E News

The last holdout on Senate Democrats’ historic climate bill is a former Green Party member who comes from a state transforming under deadly heat, stronger droughts and worsening wildfires.

Sen. Kyrsten Sinema (D-Ariz.) is not saying whether she will support the “Inflation Reduction Act,” the legislation that would direct $370 billion to energy and climate policy.

The deal was negotiated secretly between Senate Majority Leader Chuck Schumer (D-N.Y.) and West Virginia Sen. Joe Manchin, the chamber’s most conservative Democrat, with both men betting that Sinema would back the deal after it was made public. Appearing on all five Sunday news shows, Manchin talked up Sinema’s influence on the legislation — especially on taxes and drug pricing — and urged her to support it.


But so far Sinema has refused to commit (Greenwire, Aug. 1).

If Sinema does balk at the party-line bill, don’t expect her reasons to center on climate spending. Higher taxes — especially on the private equity titans who have given heavily to her campaigns — remain a major sticking point for the Arizona senator.

“Senator Sinema makes every decision based on one criteria: what’s best for Arizona,” Hannah Hurley, her spokesperson, said in a statement.

“Kyrsten supports a variety of tax reforms and revenue options that grow Arizona’s economic competitiveness and address tax avoidance by wealthy corporations — a problem not solved by simply raising statutory tax rates.”

Last year, when Democrats were negotiating a larger climate spending and tax deal, Sinema played a similar role: She was quiet in public and enigmatic in private, even to many of her Democratic colleagues.

She revealed her priorities over several months. Preserving lower tax rates for corporations and wealthy individuals was chief among them, including favorable treatment for private equity executives.

“I am unwilling to support any tax policies that would put a brake on that type of economic growth or stall business and personal growth for America’s industries,” Sinema said in an April luncheon with the Arizona Chamber of Commerce. “So I retain that position. Everyone knows it. Some people aren’t happy about it, but that’s my position.”

On most tax issues, Sinema’s priorities prevailed. The stalled $1.7 trillion “Build Back Better” legislation, on which the Schumer-Manchin package is based, would have raised the corporate tax rate from 21 percent to 26.5 percent — still well below the 35 percent corporate rate predating former President Donald Trump’s tax cuts. The deal would have also increased the top individual rate from 37 percent to 39.5 percent.

But the so-called carried interest loophole is still on the table. Carried interest is the percentage of an investment’s gains that private equity partners take as compensation. That money is currently taxed at 20 percent, which is 17 percent below the top individual tax rate. As a result, wealthy private equity firm leaders are often taxed at lower rates than blue-collar Americans.

The carried interest provision, which is expected to raise $14 billion of the $739 billion bill proposed by Manchin and Schumer, could be difficult for Sinema to swallow. Financial services firms have long been among her most dependable donors, according to federal contributions compiled by OpenSecrets, a nonprofit that tracks money in U.S. politics.

The political action committee of Goldman Sachs Group Inc. and individuals at the investment bank have given a combined $101,050 to Sinema since she first ran for federal office in 2011. That makes Goldman — whose CEO has used the carried interest loophole to boost his compensation package, according to The Wall Street Journal — her ninth-largest career contributor.

Sinema’s reliance on the financial sector and other donors potentially increased in January when EMILY’s List, a group that backs women who support reproductive freedoms, announced that it wouldn’t support her reelection campaign because she opposed reforming the filibuster rule to pass voting rights legislation. EMILY’s List was her largest career donor group.

Goldman and three other financial firms are among the top 10 donors to Sinema in the current election cycle, according to OpenSecrets. She is up for reelection in 2024.

The top financial contributor, and fourth-largest donor this cycle, is KKR & Co. Inc. Individuals at the private equity giant have given Sinema $38,300. (KKR owns a major stake in Axel Springer SE, the parent company of POLITICO, which publishes E&E News.)

Goldman, the Carlyle Group Inc. and Apollo Global Management Inc. all donated more than $29,000 to her campaign this cycle.

Goldman, KKR, Carlyle and Apollo all publicly support taking action to address climate change. But the firms haven’t weighed in on the Schumer-Manchin bill and didn’t respond to requests for comment.

Environmental groups have also heavily supported Sinema, who in 2018 defeated a Republican incumbent to become the state’s first Democratic senator in three decades.

Green donors during that cycle sent Sinema nearly $400,000 through GiveGreen, a joint fundraising effort by the League of Conservation Voters Victory Fund, NextGen America and the Natural Resources Defense Council Action Fund.

Throughout the past year of legislative negotiations, Sinema’s comments on climate policy have been supportive.

“We know that a changing climate costs Arizonans. And right now, we have the opportunity to pass smart policies to address it — looking forward to that,” Sinema told The Arizona Republic last year, during the height of congressional negotiations.

Most of the western United States is gripped by a “mega-drought” that hasn’t been seen for 1,200 years. Even in that climate-vulnerable region, Arizona stands out.

The Grand Canyon State is currently living through its 27th year of long-term drought, according to the Arizona State Climate Office.

Arizona has also struggled with soaring heat — the most direct impact of climate change, and often the deadliest. Last year, Maricopa County reported 338 heat-associated deaths. So far this year, Arizona’s most populous county has opened 126 investigations into heat-related deaths in addition to the 17 it has already confirmed.

The “Inflation Reduction Act” seeks to cut climate pollution 40 percent by 2030.

Senate staffers familiar with the negotiations said they were surprised in early July when the initial deal between Manchin and Schumer seemed to fall apart. Four Senate aides said they were under the impression that the energy and climate provisions had been all but finalized.

The disagreement appeared to focus on how to pay for the bill, rather than how the money was spent, according to one of the staffers. Even so, that aide was surprised when the text of the bill was finally released.

“This whole bill was much better than I had been led to believe it might be,” the person said.

Reporter Benjamin Storrow and the Associated Press contributed to this story.