Key Democratic Sen. Joe Manchin of West Virginia made a surprise deal with Senate Majority Leader Chuck Schumer on a $739 billion healthcare, climate and tax package, but will it actually become law?
A number of analysts are predicting that the legislation, dubbed the Inflation Reduction Act of 2022, is likely to get enacted.
“Anything that Senator Manchin supports should be able to pass the Senate on a party-line vote, but there are three hurdles that must be cleared before a reconciliation package can be cleared,” said Isaac Boltansky, managing director and director of policy research at BTIG, in a Thursday note. And any reconciliation package that passes the Senate should be able to get the House’s OK, he added.
Related: A guide to budget reconciliation, which Democrats could use to push Biden’s agenda
Boltansky said the three hurdles in the Senate have to do with the package’s provision that would address the so-called “carried interest loophole,” its omission of what’s been called “SALT relief,” and the fact that passage could be stalled by cases of COVID-19 among Democratic senators that might prevent them from voting.
Every Democratic senator’s vote is crucial as the Senate is split 50-50, and the party is only in control of the chamber because Vice President Kamala Harris can cast tiebreaking votes.
The carried interest loophole allows private-equity firms to pay lower tax rates, and another key Democratic senator, Kyrsten Sinema of Arizona, has opposed carried interest changes in the past. A Sinema spokeswoman told reporters that the senator was reviewing the text of the bill.
Read more: Senate bill could hurt private equity — here’s how
SALT relief refers to efforts to repeal a $10,000 cap on deductions from federal income tax for state and local taxes that was put in place by Republicans’ tax overhaul in 2017. Some Democratic and Republican lawmakers from high-tax states have long pushed for such relief.
“Senator Menendez (D-NJ) has already expressed some concern that the state and local tax (SALT) deduction cap is not addressed by this compromise,” BTIG’s Boltansky said, referring to Sen. Bob Menendez.
From MarketWatch’s archives (April 2021): Lawmakers launch bipartisan ‘SALT caucus’
Tobin Marcus, a policy and politics strategist at Evercore ISI, also listed the carried interest issue, SALT relief and COVID cases as potential roadblocks, but sounded somewhat optimistic.
“We would now put the odds of this bill being enacted in the 65% range — but that number could change as fast in the next few days,” Marcus said in a note.
Another possible problem could be fossil fuel provisions that progressive House Democrats could balk at, though initial signals from progressives are positive, according to the Evercore analyst.
“We would put the initial odds of the bill passing at 60-40 if Congress can move in the next two weeks,” said James Lucier, an analyst and managing director at Capital Alpha Partners, in a note.
Lucier also said his shop see wins in the bill for “nuclear, hydrogen, CCS, storage and related clean energy technologies, clean energy manufacturing, electric vehicles, renewable energy
and energy efficiency generally.” CCS refers to carbon capture and storage.
Now read: Mulling an EV? A first-ever $4,000 tax incentive for used electric vehicles is part of Manchin’s compromise
And see: What’s in, and out, of Democrats’ $739 billion healthcare and climate package