Photo-Illustration: Intelligencer; Photo: Kent Nishimura / Los Angeles Times via Getty Images
the national interest

Will Kyrsten Sinema Kill Biden’s Climate and Health Agenda?

She really, really hates taxing the rich.

Photo-Illustration: Intelligencer; Photo: Kent Nishimura / Los Angeles Times via Getty Images

The Inflation Reduction Act, the Democratic Party’s flagship domestic-policy vehicle, has the apparent support of 49 Democratic Senators, the right and left wings of the Democratic House caucus, and the Biden administration. Its fate hinges on the whims of enigmatic Senator Kyrsten Sinema.

With one glaring exception, the outlines of the deal largely hew to Sinema’s previous demands. The original plan Biden campaigned and won on called for several trillion dollars in higher taxes on the rich. Sinema objected to the entire package, and in response, Democrats junked it, replacing the robust tax-reform plan with a tinier, Sinema-approved one to impose a 15 percent minimum corporate tax on firms with revenues exceeding $1 billion a year.

The exception is a proposal to close the carried-interest tax loophole. This measure, while not especially large — it would only raise $14 billion over a decade — would eliminate a scheme used by a small number of Wall Street titans who have maneuvered to turn their work as investment advisers into capital gains, which is taxed at a lower rate than labor income.

The provision is so gross that hardly anybody actually defends it openly. And yet it has quiet backroom support, which can be measured by the fact that Donald Trump campaigned on a promise to close it yet decided not to when he designed a gigantic tax cut in 2018. Like a cockroach, the carried-interest loophole inspires widespread disgust but has a way of surviving.

Sinema ranks among the loophole’s few public defenders. She doesn’t like to talk about her support for it — in truth, Sinema doesn’t talk publicly about very much at all — but it is the one glaring Sinema red line that the Inflation Reduction Act would cross.

And so the bill presents her with three apparent choices, none terribly attractive:

(1) Sinema spikes the entire bill over her objection to the provision closing the carried-interest loophole.

(2) Sinema goes to the mat for the loophole and persuades Democrats to remove the offending provision in return for her supporting the bill.

(3) Sinema reverses her position and supports the bill.

Options (1) and, to a lesser extent, (2) would stoke intense anger among Democrats. Option (3) would alienate Sinema’s allies in the plutocrat community and cause some uncomfortable conversations at the next wine-tasting retreat.

The dilemma facing Sinema is captured by a recent poll by the left-leaning firm Data for Progress. It finds Sinema has just a 42 percent approval rating in her state, against a 48 percent disapproval one. But those numbers actually mask the scale of the challenge facing her. Only 34 percent of Democrats approve of Sinema’s job performance. The sole reason her overall numbers haven’t fallen to Nixon-after-Watergate levels is that she is buoyed by 41–47 percent positive numbers from Republicans.

The composition of her approval is far more grim than its overall level. With a mere 34 percent approval from within her own party, Sinema would stand little chance of surviving a primary challenge. She commands higher approval among Republicans, but not nearly high enough to win a Republican primary were she to switch parties.

What makes it especially difficult to project Sinema’s strategy is that nobody can say with any confidence what her goals are. Does she want to win reelection? Does she plan to remain in the Democratic Party at all?

Since Sinema’s behavior does not appear to be the product of a self-interested strategy, we should instead consider the possibility that it reflects genuine conviction. While Sinema is loath to reflect on her thinking in public, she spends a lot of time in the company of Republicans and corporate executives. My best guess — and it is only that — is that she enjoys their company, admires their lifestyle, and finds their arguments persuasive.

Sinema now faces a choice between preserving whatever remains of her chances of political survival and sustaining her alliance with the network of wealthy allies she has built. Rational self-interest would seem to dictate compromise. But when one is analyzing the decisions made by Kyrsten Sinema, rationality gets you only so far.

Will Kyrsten Sinema Kill Biden’s Climate and Health Agenda?