A group of wealthy investors and business leaders who support progressive taxation launched a campaign Tuesday aimed at pushing Sen. Kyrsten Sinema to back efforts to repeal the carried interest loophole, which allows rich private equity moguls to substantially reduce their tax bills.
According to Patriotic Millionaires, the organization behind the new effort, Sinema (D-Ariz.) is the only member of the Senate Democratic caucus opposed to eliminating the loophole, a longtime target of progressives.
Private equity interests, for their part, have aggressively lobbied Congress—and Sinema in particular—to keep the profitable carveout intact. Thus far their influence-peddling has succeeded in keeping any proposed repeal of the tax break out of Democrats' Build Back Better Act, which the Senate is expected to vote on before the Christmas holiday.
"The carried interest is the most intellectually indefensible, morally unforgivable loophole in the entire tax code, and Senator Sinema's defense of it is patently absurd," Erica Payne, president and founder of the Patriotic Millionaires, said in a statement. "Every Democrat in the Senate, even Joe Manchin, is on board with closing this ridiculous loophole except for Senator Sinema. It's time for her to decide who she works for: Arizonans, or private equity billionaires."
As part of the pressure campaign, Patriotic Millionaires members—including Karen Stewart of Arizona, a former Certified Financial Planner and finance professor—took out full-page ads in local newspapers and plan to hold demonstrations outside Sinema's regional office to demand that she change her stance on the loophole.
"Sinema's support for preserving the carried interest loophole for Wall Street elites comes at the expense of the tax-paying voters in her own backyard," said Stewart. "Special interests and wealthy lobbyists should not decide the future of our nation. What American families need right now are lawmakers willing to prioritize them over the millionaires and billionaires, not a mouthpiece for the already rich and powerful."
Carried interest refers to the portion of an investment firm’s profit that is paid to fund managers, who—under current tax rules—are allowed to treat the income as long-term capital gains, which are taxed at a lower rate than labor income.
The Congressional Budget Office has estimated that taxing carried interest as ordinary income would raise roughly $20 billion in federal revenue over a decade.
Despite broad support for such a policy change within the Democratic caucus, it is not among the tax measures in Democrats' $1.75 trillion reconciliation bill.
Sinema, a major obstacle to Democrats' plans to raise taxes on the wealthy, has recently held fundraisers with private equity interests that would be hit by repeal of the carried interest loophole. The Intercept reported in September that over "the past two years, Sinema has received tens of thousands of dollars in maxed-out donations from private equity partners... and investment firm CEOs."
In an open letter to Sinema published as full-page ads in local newspapers across Arizona, Payne, Stewart, and Patriotic Millionaires chair Morris Pearl argue that "closing tax loopholes for billionaires is the easiest, fastest, most productive way to 'pay for' new investments in the country and simultaneously unrig an economy that 70% of Americans think is rigged against them (Guess what? They're right)."
"Which leads us to the real question at the heart of all of this," the letter continues. "Who exactly are you working for, Senator Sinema: Arizonans or The Billionaires?"
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