How Wall Street wooed Sen. Kyrsten Sinema and preserved its

Long before Sen. Kyrsten Sinema, D-Ariz., held up a massive spending bill that promised to create jobs, invest in clean energy and tax the rich — delivering on some of President Joe Biden’s and the Democratic party’s top campaign promises — those working at Wall Street investment firms had donated millions to the freshman senator’s campaign.

One of her main objections was the bill’s so-called carried interest tax provision — which would have closed an arcane loophole in tax law that allowed hedge fund managers, law firm partners and private equity executives, among others, to pay significantly less taxes than ordinary workers.

Closing that loophole, which was estimated to raise $14 billion in tax revenue over the next decade, was supposed to help pay for $433 billion in spending on climate and health initiatives.

To get Sinema’s vote, and the bill passed, Senate Majority Leader Chuck Schumer said Democrats had “no choice” but to drop that provision from the broader Inflation Reduction Act. The bill instead imposes a 1% tax on all corporate share buybacks along with a minimum corporate tax rate of 15% on companies with more than $1 billion in revenues. The massive spending-and-tax package squeaked through the evenly divided Senate 51-50 on Sunday with Vice President Kamala Harris’ tie-breaking vote. It’s expected to pass the House later this week.

“Arizona Sens. Kyrsten Sinema and Mark Kelly will be critical voices and votes in the upcoming infrastructure debate,” Drew Maloney, the president and CEO of the American Investment Council, wrote in an op-ed published by an Arizona news outlet. The trade group represents some of the world’s largest private equity firms, including Blackstone, Apollo Global Management, Carlyle Group and KKR. “I urge them to continue supporting private investment’s role in helping small businesses here in Arizona and across the country,” he added.

One of the group’s top priorities was then, and is now, to preserve “carried interest capital gains and prevent elimination of interest deductibility.”

“Our team worked to ensure that members of Congress from both sides of the aisle understand how private equity directly employs workers and supports small businesses throughout their communities,” Maloney said in a statement to CNBC. “Our advocacy helped prevent punitive tax increases that would make it harder for investors to continue to support jobs, small businesses, and pensions in every state.”

Sinema’s been fighting to help preserve the loophole since at least last year…