Office of Senator Kyrsten Sinema
Kyrsten Sinema meets with members of the Yuma community on March 1, 2022.
Senator Kyrsten Sinema, the Arizona Democrat who single-handedly thwarted her party’s longstanding goal of raising taxes on wealthy investors, received nearly $1 million during the year elapsed from private equity professionals, hedge fund managers and venture capitalists whose taxes would have risen under the plan.
For years, Democrats have promised to raise taxes on these 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 pushed through a series of changes to his party’s $740 billion spending plan for the election year, eliminating a proposed tax hike. on “deferred interest” on private equity income while securing a $35 billion exemption that will spare much of the industry from a separate tax hike that other large corporations now have to pay.
The bill, with Sinema’s amendments intact, received final congressional approval on Friday and is expected to be signed by President Joe Biden next week.
Sinema has long aligned herself with private equity, hedge fund and venture capital interests, helping her raise at least $1.5 million in campaign contributions since her election to the House a year ago. ten years. But the $983,000 she has raised since last summer has more than doubled what the industry has given her in all her previous years in Congress combined, according to an Associated Press review of the disclosures. campaign finance.
The donations, which make Sinema one of the industry’s top beneficiaries in Congress, serve as a reminder of how high-powered lobbying campaigns can have dramatic implications for how legislation is crafted, especially in the Senate. equally divided where there are no Democratic votes. save. They also highlight a degree of political risk for Sinema, whose unabashed defense of the industry’s favorable tax treatment is seen by many in his party as indefensible.
“From their perspective, it’s a million dollars very well spent,” said Dean Baker, senior economist at the Center for Economic and Policy Research, a liberal-leaning think tank. “It is quite rare that you see such a direct return on your investment. So I guess I would congratulate them.
Sinema’s office refused to release her for an interview. Hannah Hurley, a spokeswoman for Sinema, acknowledged that the senator shares some of the industry’s views on taxation, but dismissed 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. competitiveness.”
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The American Investment Council, a trade group that lobbies on behalf of private equity, also defended its efforts to defeat the tax provisions.
“Our team has worked to ensure that members of Congress on both sides of the aisle understand how private equity directly employs workers and supports small businesses in their communities,” said Drew Maloney, CEO and Chairman of organization, in a press release.
Sinema’s defense of the tax treatment of wealthy investors offers a stark contrast to her past as a Green Party activist and self-proclaimed ‘Prada socialist’ who once likened accepting campaign money to ‘corruption’ and later called on “big business and the wealthy to pay their fair share” before launching his first campaign for Congress in 2012.
She’s been far more magnanimous since, praising private equity in 2016 from the floor of the House for providing “billions of dollars every year to high street businesses.” After his election to the Senate, Sinema interned during the 2020 Congressional recess at a private equity mogul’s winery boutique in Northern California.
Growing industry contributions to Sinema date back to last summer. That’s when she first made it clear that she wouldn’t support a tax hike on deferred interest, along with other corporate and business tax hikes included. in an earlier version of Biden’s platform.
In a two-week period in September alone, Sinema raised $47,100 in contributions from 16 senior executives at private equity firm Welsh, Carson, Anderson & Stowe, records show. Employees and executives of KKR, another private equity giant, paid $44,100 to Sinema over a two-month period at the end of 2021.
In some cases, the families of private equity managers have joined us. 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 college-age children, with the family collectively donating $23,200, records show.
“I generally support centrist Democrats, and his seat is important in maintaining a Democratic majority in the Senate,” Belluck said, adding that his family knew Sinema from his election to Congress. “She and I never discussed the taxation of private equity.”
The industry donations coincide with a $26 million lobbying effort led by investment firm Blackstone that culminated in the Senate last weekend.
By the time the bill was debated in a series of marathon votes, Sinema had already coerced Democrats into abandoning their carried interest tax hike.
“Senator Sinema has said she will not vote for the bill…unless we delete it,” Senate Majority Leader Chuck Schumer told reporters last week. “We had no choice.”
But after private equity lobbyists uncovered a provision in the bill that would have subjected many of them to a separate 15% minimum corporate tax, they urgently pressed Sinema and other Democrats. centrists for changes, according to emails as well as four people with direct knowledge of the case who requested anonymity to discuss internal deliberations.
“Given the disruptive nature of this development, we need as many offices as possible to address the concerns of Chief Schumer’s office,” Blackstone lobbyist Ryan McConaghy wrote in an email Saturday afternoon. noon obtained by the AP, which included proposed language to amend the bill. “Would you and your boss be willing to sound the alarm about this and voice your concerns to Schumer and his 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 throughout Arizona. Her positions on fiscal policy and her focus on growing the economy and of Arizona’s competitiveness are long-standing and well known,” said Sinema spokesperson Hurley.
But many in his party disagree. They say the favorable tax treatment does little to boost the overall economy and argue that there is little convincing evidence to suggest its benefits accrue beyond some of the wealthiest investors.
Some Sinema donors are pleading their case.
Blackstone, a major source of campaign contributions, owns vast tracts of real estate in Sinema’s home state of Arizona. The company was condemned by United Nations experts in 2019 who said Blackstone’s financial model was responsible for a “financialization of housing” that drove up rents and housing costs, “pushing people to low income and increasingly middle income from their homes”.
Blackstone employees, executives and family members have given Sinema $44,000 since 2018, records show.
In a statement, Blackstone called the UN experts’ claims “false and misleading” and said all employee contributions were “strictly personal”. The company added that it was “incredibly proud of its investments in housing”.
Another major financial services donor is Centerbridge Partners, a New York-based company that buys debt from struggling governments and companies and often uses hard-line tactics to extract value from it. 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, records show.
In 2012, Centerbridge Partners bought Arizona-based restaurant chain PF Chang’s for about $1 billion. After loading 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 coronavirus relief loan to cover payrolls, which the federal government later forgave but cut jobs and closed sites as it battled 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 it bought up billions of dollars of the island’s government’s $72 billion debt — and sued legal action to recover. A subsidiary of Centerbridge Partners was among a group of creditors who repeatedly sued one of the US territory’s pension funds. In a 2016 lawsuit, the group of creditors asked a judge to embezzle money from a Puerto Rican pension fund in order to recover it.
A Centerbridge representative could not provide 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 ways to win, but there is no universe in which it is politically intelligent 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 will absolutely be a powerful problem.”