Manchin and Sinema are on a collision course over closing a tax loophole for rich Americans. It could upend Biden’s $790 billion deal

Senate Democrats are relearning an old Argentine dance lesson: It takes two to tango.

Sen. Joe Manchin of West Virginia stunned many by striking an agreement for a $790 billion climate, healthcare, and tax package. The legislation is much bigger than most Democrats thought possible only two weeks ago when Manchin appeared to take climate programs and tax hikes off the table, citing growing fears about fueling inflation.

But the most carefully negotiated deals can still be upended in an environment where no margin of error exists. Manchin is on a collision course with Sen. Kyrsten Sinema of Arizona over a small part of the bill. The pair disagree on carried interest, a loophole in the tax code that mostly benefits wealthy investors and hedge fund managers.

Eliminating carried interest is a goal that’s eluded both Republican and Democratic administrations for a decade. It’s the percentage of profits that hedge-fund managers receive from lucrative investments. But that compensation is taxed at a lower capital gains rate that tops out at 23.8% and doesn’t face a higher income tax rate like most Americans pay on their wages. Critics argue it amounts to a huge gap in the tax code.

Source Credit https://www.businessinsider.com/manchin-sinema-carried-interest-biden-deal-2022-7

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