Sinema eyes adjustments to tax, local weather components of the reconciliation invoice

Sen. Kyrsten Sinema (D-Ariz.) is eyeing changes to Democrats’ $740 billion reconciliation bill — specifically increasing climate funding and restructuring tax provisions — as the Senate moves quickly toward final passage before recess August, Axios has learned.

Why it’s important: Sinema is the only senator who may be standing up to Democrats giving in to President Biden’s longtime goal of passing an ambitious package to tackle climate change, health care and taxes — renamed the “Act for Inflation Reduction 2022.”

  • That position gives her enormous leverage as Democrats await a verdict from the Senate on whether the bill meets the “Byrd Rule,” which governs what provisions can be included in the budget resolution process.
  • Since the negotiations were conducted entirely in secret between Senate Majority Leader Chuck Schumer (DN.Y.) and Senator Joe Manchin (DW.V.) – taking Sinema by surprise – she has left room for an 11th intervention an hour.
  • So far Sinema has refused to consider whether or not she will support the bill until the parliamentarian gives her verdict on the measure.

What we’re hearing: Sinema is looking to significantly increase funding in the reconciliation bill for drought and water security in the Southwest, sources familiar with her thought process tell Axios.

  • According to her, the current portion of the bill, $369 billion, on climate and energy is insufficient to address threat resilience funding.

On taxes, Sinema is concerned about the structure of the 15% minimum corporate “book tax” and whether the burden could be passed on to employees, the sources said.

  • Sinema supports cracking down on tax avoidance, but has long opposed closing the interest-bearing route.
  • She worries that the provision, which would add $14 billion toward paying the bill’s total $740 billion, could undermine economic competitiveness, the sources said.

In the background: Sinema held a private, up-close and personal meeting with key stakeholders in Arizona as she continued to work through her assessment of the bill.

  • Cinema last week visit Flagstaff, Arizonawhere she met with local officials who are still dealing with recent floods and wildfires that devastated the state.
  • Arizona is one of the fastest warming state in the USand the largest county in the state, Maricopa County, has already been hit record for heat-related deaths this year.
  • “Some are surprised to learn that Kyrsten was enthusiastic about the climate provisions last year, because they rightly consider her a centrist. But she is a senator from Arizona, first of all,” John LaBombard, former director of communications for Sinema and SVP at ROKK Solutions tells Axios.

I phone call Tuesday with the Arizona Chamber of Commerce, local business leaders and manufacturers discussed with Sinema what the proposed 15% corporate minimum tax and the carried interest loophole would mean for Arizona.

  • The private equity industry, which greatly contributed to Sinemalobbying her hard to reduce the interest carried.
  • “I remember last year, she was listening to feedback from small business owners, concerned about the possible implications of any changes in tax policy, and how it could affect their capital investment streams,” said LaBombard.
  • “She is someone who is very cautious when it comes to changing tax policies. … Of course, I think [their input] shaped by where she is on the economic parts of this bill.”

What they are saying: “What is clear from our conversation is that she is taking a thoughtful and diligent approach in considering her position on this legislation,” Danny Seiden, CEO of the Arizona Association, told Axios’ Hans Nichols.

  • “She was very interested in learning what specific impacts the tax provisions will have on Arizona manufacturers – and we believe she will consider those implications seriously as negotiations continue in the coming days. ”

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