WASHINGTON — sen. Kyrsten Sinema, the Arizona Democrat who single-handedly thwarted her party’s long-standing goal of raising taxes on wealthy investors, last year received nearly $1 million from private equity professionals, hedge fund managers and venture capitalists whose taxes are said to be risen under the plan.
For years, Democrats have promised to raise taxes on such investors, who pay a significantly lower rate on their earnings than regular employees. But just as they met that goal last week, Sinema forced a series of changes to her party’s $740 billion spending package for the election year, eliminating a proposed tax increase on private equity income and a $35 billion exemption. was obtained. save much of the industry from a separate tax hike that other big companies now have to pay.
The bill, with Sinema’s amendments intact, was finally approved by Congress on Friday and is expected to be signed by President Joe Biden next week.
Sinema has long associated with the interests of private equity, hedge funds and venture capital, helping her rake in at least $1.5 million in campaign contributions since she was elected to the House a decade ago. But the $983,000 she’s raised since last summer more than doubled what the industry donated to her during all of her previous years in Congress combined, according to an Associated Press survey of campaign finance disclosures.
The donations, which make Sinema one of the industry’s largest beneficiaries in Congress, are a reminder of how high-power lobbying campaigns can dramatically affect the way legislation is passed, especially in the evenly divided Senate where no one is. are Democratic voices. save. They also emphasize a degree of political risk to Sinema, whose audacious defense of the sector’s favorable tax treatment is considered indefensible by many in her party.
“From their point of view, it’s a million dollars very well spent,” said Dean Baker, senior economist at the Center for Economic and Policy Research, a liberal-oriented think tank. “It’s quite rare to see such an immediate return on investment. So I think I would congratulate them.”
Sinema’s office refused to make her available for an interview. Hannah Hurley, a spokesperson for Sinema, acknowledged that the senator shares some of the industry’s views on taxes, but rejected any suggestion that the donations influenced her thinking.
“Senator Sinema makes every decision based on one criterion: what’s best for Arizona,” Hurley said in a statement. “It has been clear and consistent for over a year that it will only support tax reforms and revenue options that promote economic growth and competitiveness.”
The American Investment Council, a trade group that lobbies on behalf of private equity, also defended their push to overturn the tax provisions.
“Our team has helped congressmen from both sides of the aisle understand how private equity directly employs employees and supports small businesses in their communities,” Drew Maloney, the organization’s CEO and president, said in a statement.
Sinema’s defense of the tax treatment of wealthy investors stands in stark contrast to her background as a Green Party activist and self-proclaimed “Prada socialist” who once compared accepting campaign money to “bribery” and later called for “big business.” & the rich to pay their fair share” before launching her first congress campaign in 2012.
Since then, she’s been much more magnanimous, praising private equity from the House floor in 2016 for providing “billions of dollars a year to Main Street companies.” After her election to the Senate, Sinema interned during the 2020 congressional recess at a boutique winery owned by a private equity mogul in Northern California.
Industry’s significant contributions to Sinema go back to last summer. That’s when she first made it clear that she would not support an interest rate hike, as well as other corporate and corporate tax hikes that were included in a previous iteration of Biden’s agenda.
In September alone, Sinema collected $47,100 in contributions over a two-week period from 16 senior officials of the private equity firm Welsh, Carson, Anderson & Stowe, data shows. Employees and executives of KKR, another private equity giant, contributed $44,100 to Sinema over a two-month period at the end of 2021.
In some cases, the families of private equity managers participated. David Belluck, a partner at Riverside Partners, made a maximum contribution of $5,800 to Sinema one day in late June. So did three of his school-age children, with the family donating $23,200 together, data shows.
“In general, I support the centrist Democrats and her seat is important to maintain a majority of the Democratic Senate,” Belluck said, adding that his family has known Sinema since her election to Congress. “She and I never discussed the private equity tax.”
The industry donations coincide with a $26 million lobbying effort led by the investment firm Blackstone, which culminated on the Senate floor last weekend.
By the time the bill was up for discussion in a marathon run of votes, Sinema had already forced Democrats to waive their increased tax hike.
“Senator Sinema said she wouldn’t vote for the bill… unless we scrap it,” Senate 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 tax, they urged Sinema and other center Democrats to make changes, according to emails and four people with direct knowledge of the bill. the case requesting anonymity to discuss internal deliberations.
“Given the groundbreaking nature of this development, we need as many offices as possible that address the concerns of Leader Schumer’s office,” Blackstone lobbyist Ryan McConaghy wrote in an email obtained by the AP on Saturday afternoon, stating suggested language for changing the account. “Would you and your boss sound the alarm and voice your concerns to Schumer and the team?”
McConaghy did not respond to a request for comment.
Sinema worked with Republicans on an amendment that removed the minimum corporate tax on private equity from the bill, which a handful of vulnerable Democrats also voted for.
“Since serving in Congress, Kyrsten has consistently supported pro-growth policies that encourage job creation across Arizona. Her positions on tax policy and focus on growing Arizona’s economy and competitiveness have long been known and known,” said Hurley, Sinema’s spokesman.
But many in her party disagree. They say the favorable tax treatment contributes little to the overall economy and there is little convincing evidence to suggest its benefits are enjoyed outside of some of the wealthiest investors.
Some of Sinema’s donors are arguing.
Blackstone, a major source of campaign contributions, owns large tracts of real estate in its home state of Sinema, Arizona. The company was condemned in 2019 by experts at the United Nations, who said Blackstone’s financial model was responsible for a “financialization of housing” that has pushed up rents and housing costs, “leaving low-income and increasingly middle-income people out of their homes.” displaced houses”.
Blackstone employees, executives and their family members have given Sinema $44,000 since 2018, data shows.
In a statement, Blackstone called the UN experts’ allegations “false and misleading” and said all employee contributions are “strictly personal”. The company added that it was “incredibly proud of its investment in housing”.
Another major financial services donor is Centerbridge Partners, a New York-based company that buys up the debt of ailing governments and corporations and often uses hard-hitting tactics to extract value. Since 2017, Sinema has raised at least $29,000 from donors associated with the company, including co-founder Mark Gallogly and his wife, Elizabeth Strickler, data shows.
In 2012, Centerbridge Partners bought Arizona-based restaurant chain PF Chang’s for approximately $1 billion. After saddled the struggling company with $675 million in debt, they sold it to another private equity group in 2019, according to Bloomberg News. The company received a $10 million loan for coronavirus relief to cover payroll, which the federal government later forgave but slid 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 pursuing legal action to collect. A subsidiary of Centerbridge Partners belonged to a group of creditors that repeatedly sued one of the pension funds in the US territory. In a 2016 lawsuit, the group of creditors asked a judge to collect money from a Puerto Rican pension fund to collect.
A representative from Centerbridge was unable to comment.
Liberal activists in Arizona say they plan to make Sinema’s reliance on donations from wealthy investors a campaign issue when she is re-elected in 2024.
“There are many views on how to win, but there is no universe where it is politically smart to fight for favorable tax treatment for the richest people in the country,” said Emily Kirkland, a political adviser who works for progressive candidates. . “It’s definitely going to be a powerful problem.”
Associated Press writer Josh Boak contributed to this report.
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