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Sinema Took Money While Killing Tax 08/13 09:19
WASHINGTON (AP) -- Sen. Kyrsten Sinema, the Arizona Democrat who
single-handedly thwarted her party's longtime goal of raising taxes on wealthy
investors, received nearly $1 million over the past year from private equity
professionals, hedge fund managers and venture capitalists whose taxes would
have increased under the plan.
For years, Democrats have promised to raise taxes on such investors, who pay
a significantly lower rate on their earnings than ordinary workers. But just as
they closed in on that goal last week, Sinema forced a series of changes to her
party's $740 billion election-year spending package, eliminating a proposed
"carried interest" tax increase on private equity earnings while securing a $35
billion exemption that will spare much of the industry from a separate tax
increase other huge corporations now have to pay.
The bill, with Sinema's alterations intact, was given final approval by
Congress on Friday and 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 the $983,000
she has collected since last summer more than doubled what the industry donated
to her during all of her preceding years in Congress combined, according to an
Associated Press review of campaign finances disclosures.
The donations, which make Sinema one of the industry's top beneficiaries in
Congress, serve a reminder of the way that high-power lobbying campaigns can
have dramatic implications for the way legislation is crafted. They also
highlight a degree of political risk for Sinema, whose unapologetic defense of
the industry's favorable tax treatment is viewed by many in her party as
indefensible.
"From their vantage point, it's a million dollars very well spent," said
Dean Baker, a senior economist at the Center for Economic and Policy Research,
a liberal-leaning think tank. "It's pretty rare you see this direct of a return
on your investment. So I guess I would congratulate them."
Sinema's office declined to make her available for an interview. Hannah
Hurley, a Sinema spokesperson, acknowledged the senator shares some of the
industry's views on taxation, but rebuffed any suggestion that the donations
influenced her thinking.
"Senator Sinema makes every decision based on one criteria: what's best for
Arizona," Hurley said in a statement. "She has been clear and consistent for
over a year that she will only support tax reforms and revenue options that
support Arizona's economic growth and competitiveness."
The American Investment Council, a trade group that lobbies on behalf of
private equity, also defended their push to defeat the tax provisions.
"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," Drew Maloney, the organization's CEO
and president, said in a statement.
Sinema's defense of the tax provisions offer a jarring contrast to her
background as a Green Party activist and self-styled "Prada socialist" who once
likened accepting campaign cash to "bribery" and later called for "big
corporations & the rich to pay their fair share" shortly before launching her
first campaign for Congress in 2012.
She's been far more magnanimous since, praising private equity in 2016 from
the House floor for providing "billions of dollars each year to Main Street
businesses" and later interning at a private equity mogul's boutique winery in
northern California during the 2020 congressional recess.
The soaring contributions from the industry to Sinema trace back to last
summer. That's when she first made clear that she wouldn't support a carried
interest tax increase, as well as other corporate and business tax hikes,
included in an earlier iteration of Biden's agenda.
During a two-week period in September alone, Sinema collected $47,100 in
contributions from 16 high-ranking officials from the private equity firm
Welsh, Carson, Anderson & Stowe, records show. Employees and executives of KKR,
another private equity behemoth, contributed $44,100 to Sinema during a
two-month span in late 2021.
In some cases, the families of private equity managers joined in. David
Belluck, a partner at the firm Riverside Partners, gave a $5,800 max-out
contribution to Sinema one day in late June. So did three of his college-age
kids, with the family collectively donating $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 taxation."
The donations from the industry coincide with a $26 million lobbying effort
spearheaded by the investment firm Blackstone that culminated on the Senate
floor last weekend.
By the time the bill was up for debate during a marathon series of votes,
Sinema had already forced Democrats to abandon their carried interest tax
increase.
"Senator Sinema said she would not vote for the bill .. unless we took it
out," Senate Majority Leader Chuck Schumer told reporters last week. "We had no
choice."
But after private equity lobbyists discovered a provision in the bill that
would have subjected many of them to a separate 15% corporate minimum tax, they
urgently pressed Sinema and other centrist Democrats for changes, according to
emails as well as four people with direct knowledge of the matter who requested
anonymity to discuss internal deliberations.
"Given the breaking nature of this development we need as many offices as
possible weighing in with concerns to Leader Schumer's office," Blackstone
lobbyist Ryan McConaghy wrote in a Saturday afternoon email obtained by the AP,
which included proposed language for modifying the bill. "Would you and your
boss be willing to raise the alarm on this and express concerns with Schumer
and team?"
McConaghy did not respond to a request for comment.
Sinema worked with Republicans on an amendment that stripped the corporate
tax increase provisions from the bill, which a handful of vulnerable Democrats
also voted for.
"Since she has been in Congress, Kyrsten has consistently supported
pro-growth policies that encourage job creation across Arizona. Her tax policy
positions and focus on growing Arizona's economy and competitiveness are
longstanding and well known," Hurley, the Sinema spokesperson, said.
But many in her party disagree. They say the favorable treatment does little
to boost the overall economy and argue there's little compelling evidence to
suggest the tax benefits are enjoyed beyond some of the wealthiest investors.
Some of Sinema's donors make their case.
Blackstone, a significant source of campaign contributions, owns large
tracts of real estate in Sinema's home state, Arizona. The firm was condemned
by United Nations experts in 2019 who said Blackstone's financial model was
responsible for a "financialization of housing" that has driven up rents and
home costs, "pushing low-income, and increasingly middle-income people from
their homes."
Blackstone employees executives and their family members have given Sinema
$44,000 since 2018, records show.
In a statement, Blackstone called the allegations by the UN experts "false
and misleading" and said all employee contributions are "strictly personal."
The firm added that it was "incredibly proud of its investments in housing."
Another major financial services donor is Centerbridge Partners, a New
York-based firm that buys up the debt of distressed governments and companies
and often uses hardball tactics to extract value. Since 2017, Sinema has
collected at least $29,000 from donors associated with the firm, including
co-founder Mark Gallogly and his wife, Elizabeth Strickler, records show.
In 2012, Centerbridge Partners purchased Arizona-based restaurant chain P.F.
Chang's for roughly $1 billion. After loading the struggling company up with
$675 million of debt, they sold it to another private equity group in 2019,
according to Bloomberg News. The company received a $10 million coronavirus aid
loan to cover payroll, but shed jobs and closed locations as it struggled with
the pandemic.
Centerbridge Partners was also part of a consortium of hedge funds that
helped usher in an era of austerity in Puerto Rico after buying up billions of
dollars of the island government's $72 billion debt -- and filing legal
proceedings to collect. A subsidiary of Centerbridge Partners was among a group
of creditors who repeatedly sued one of the U.S. territory's pension funds. In
one 2016 lawsuit, the group of creditors asked a judge to divert money from a
Puerto Rican pension fund in order to collect.
A Centerbridge representative could not immediately provide comment Friday.
Liberal activists in Arizona say they plan to make Sinema's reliance on
donations from wealthy investors a campaign issue when she is up for reelection
in 2024.
"There are many takes on how to win, but there is no universe in which it is
politically smart to fight for favorable tax treatment of the wealthiest people
in the country," said Emily Kirkland, a political consultant who works for
progressive candidates. "It's absolutely going to be a potent issue."
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