Sinema takes Wall Street money while taxing investors

WASHINGTON (AP) — Sen. Kyrsten Sinema, D-Ariz., has single-handedly thwarted her party’s longstanding goal of raising taxes on wealthy investors, garnering support from private equity professionals over the past year. , hedge fund managers and venture capitalists received nearly $1 million in taxes. It will be increased under the plan.

Democrats have for years promised tax increases for such investors, who pay significantly less on their income than the average worker.But just as they approached that goal last week, Sinema forced a series of changes to her party’s $740 billion election-year spending plan, scrapping a proposed “carried interest” tax increase. Private equity gains, along with a $35 billion exemption that would shield much of the industry from the separate tax increases that other big companies now have to pay.

The bill received final approval from Congress on Friday with Sinema’s changes intact It is expected to be signed by President Joe Biden next week.

Sinema has long aligned herself with the interests of private equity, hedge funds and venture capital, helping her net at least $1.5 million in campaign contributions since she was elected to the House a decade ago. But according to an AP review of campaign finance disclosures , since last summer, the $983,000 she has collected is more than double what the industry has donated to her in her years before Congress combined.

The donations make Sinema one of the industry’s biggest beneficiaries in Congress, a reminder that high-power lobbying can have a huge impact on how legislation is crafted, especially in the Senate, which has no Democratic votes. Free up, free up. They also highlighted a degree of political risk to Sinema, with many in her party arguing that her unapologetic defense of the industry’s favourable tax treatment was untenable.

“From their perspective, the $1 million was a good deal,” said Dean Baker, a senior economist at the Center for Economic and Policy Research, a liberal think tank. “You rarely see this kind of immediate return on investment. So, I thought I would congratulate them.”

Sinema’s office declined to make her available for an interview. Sinema’s spokeswoman, Hannah Hurley, acknowledged that the senator shared some industry views on the tax issue, but rejected any suggestion that donations influenced her thinking.

“Senator Sinema makes every decision based on one criterion: what’s best for Arizona,” Hurley said in a statement. “For more than a year, she has been clear that she will only support tax reform and income options that support Arizona’s economic growth and competitiveness.”

The American Investment Committee, a trade group that lobbies on behalf of private equity, also defended their efforts to oppose the tax rules.

“Our team works to ensure that members of Congress on both sides of the aisle understand how private equity can directly hire workers and support small businesses across communities,” Drew Maloney, the group’s CEO and president, said in a statement.

Sinema has defended the tax treatment of wealthy investors in contrast to her background as a Green Party activist and self-styled “Prada socialist” who has likened receiving campaign funds to “bribery” She later called for “big corporations and the wealthy to pay their fair share” before launching her first congressional campaign in 2012.

Since then, she has become more forgiving, praising private equity in the House of Representatives in 2016 for “providing billions of dollars a year to Main Street businesses.” Senama is at a boutique winery of a private equity tycoon in Northern California during the 2020 congressional recess after the Senate election.

The industry’s huge contribution to Sinema dates back to last summer. That’s when she made it clear for the first time that she would not support a tax increase on carried interest, as well as other corporate and corporate tax hikes included in Biden’s early agenda.

In just two weeks in September, Sinema received $47,100 in donations from 16 senior officials at private equity firms Welsh, Carson, Anderson & Stowe, records show. Employees and executives at another private equity giant, KKR, contributed $44,100 to Sinema over two months at the end of 2021.

In some cases, families of private equity managers have also joined. David Belluck, a partner at Riverside Partners, made a maximum donation of $5,800 to Sinema on one day in late June. The same goes for his three college-aged children, whose family donated a combined $23,200, records show.

“I generally support centrist Democrats and her seat is important to keep a Democratic Senate majority,” Belluck said, adding that his family has known Sinema since her election to Congress. “She and I have never discussed private equity taxes.”

The industry’s donations coincided with a $26 million lobbying campaign spearheaded by investment firm Blackstone Group, which culminated in the Senate over the weekend.

As the bill is debated in a series of marathon ballots, Sinema has already forced Democrats to forego increasing the tax on carried interest.

“Senator Sinema said she’s not going to vote for the bill … unless we get it out,” Senate Majority Leader Chuck Schumer told reporters last week. “We have no choice.”

But after private equity lobbyists discovered a provision in the bill that would make many of them individually pay the 15 percent corporate minimum tax, they urgently urged Sinema and the company, according to emails and four people with direct knowledge of the matter. Other centrist Democrats made changes. The matter requested anonymity to discuss internal deliberations.

“Given the disruptive nature of this development, we need as many offices as possible to reach out to Schumer leaders’ offices,” Blackstone lobbyist Ryan McConaughey wrote in an email obtained by The Associated Press Saturday afternoon, which included Include proposed language to amend the bill. “Would you and your boss be willing to warn about this and express concern for Schumer and the team?”

McConaughey did not respond to a request for comment.

Sinema worked with Republicans on an amendment that removed the corporate minimum tax on private equity from the bill, which a handful of vulnerable Democrats also voted for.

“Since her tenure in Congress, Kyrsten has supported pro-growth policies that encourage job creation in Arizona. Her tax policy stance and focus on growing Arizona’s economy and competitiveness are well known,” Sinema spokesman He Earley said.

But many in her party disagree. They say the favorable tax treatment has done little to boost the overall economy, arguing that there is little convincing evidence that its benefits extend beyond some of the wealthiest investors.

Some of Sinema’s donors offered their opinions.

Blackstone is a significant source of campaign contributions and owns large tracts of real estate in Sinema’s home state of Arizona. The company was condemned in 2019 by UN experts who said Blackstone’s financial model had led to the “financialization of housing”, driving up rents and housing costs and “pushing out low- and increasingly middle-income populations”. their home.”

Blackstone employees, executives and their families have donated $44,000 to Sinema since 2018, records show.

In a statement, Blackstone called the UN experts’ allegations “false and misleading” and said all employee contributions were “strictly personal.” The company added that it was “incredibly proud of its investment in housing”.

Another big financial services donor is Centerbridge Partners, a New York-based firm that acquires the debt of troubled governments and corporations and often uses tough tactics to capture value. Since 2017, Sinema has raised at least $29,000 from donors tied to the company, including co-founder Mark Gallogli and his wife Elizabeth Strickler, records show.

In 2012, Centerbridge Partners acquired Arizona-based restaurant chain PF Chang’s for about $1 billion. After taking on $675 million in debt for the struggling company, they sold it to another private equity group in 2019, according to Bloomberg. The company received a $10 million coronavirus aid loan to pay wages, which the federal government later forgave but cut jobs and closed locations as it battled the pandemic.

Centerbridge Partners is also part of a consortium of hedge funds that helped usher in an era of austerity in Puerto Rico after buying billions of dollars in the island’s government’s $72 billion debt and filing legal action. A subsidiary of Centerbridge Partners is one of a group of creditors that has sued the U.S. territorial pension fund multiple times. In a 2016 lawsuit, the group of creditors asked a judge to divert funds from Puerto Rico’s pension fund in order to recover the funds.

A representative for Centerbridge was unavailable for comment.

Liberal activists in Arizona say they plan to make Sinema’s reliance on donations from wealthy investors a campaign issue when she runs for re-election in 2024.

Emily Kirkland, a political adviser who works for progressive candidates, said: “There are a lot of opinions on how to win, but none of them is politically wise to get favorable tax treatment for the richest people in the country. “It’s definitely a serious problem.”

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Associated Press writer Josh Bock contributed to this report.

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