Winners and Losers in Democrats’ Signature Tax and Energy Bill

(Bloomberg) -- President Joe Biden and Senate Majority Leader Chuck Schumer are the biggest winners now as much of the Democrats' economic agenda races toward passage.
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The tax and energy bill was passed on Sunday after a year and a half of rocky negotiations that split the party. It gives Democrats tangible progress on key issues to show voters in November's midterm elections.
Biden's popularity plummeted a year ago in the wake of an arbitrary withdrawal from Afghanistan and rising inflation -- and a year of infighting among Democrats over the domestic political agenda. That dispute is a thing of the past, and Biden can say that a cornerstone of his agenda will become law.
Schumer was slammed last year for failing to unite his caucus behind Biden's Build Back Better plan. He managed to revive a stripped-down version of the deal, handling last-minute raids and blinding Republicans hours after they gave up their leverage by passing a bipartisan semiconductor bill.
Here's who else comes out on top, and who benefits from the landmark bill:
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WINNER:
The wealthy
None of the billions of dollars in tax increases that Democrats promised a year ago for high-income Americans made it into the final draft of the bill, including proposals to double the capital gains rate, raise inheritance taxes and impose a surcharge on millionaires . Despite the Democrats' rhetoric that they wanted the wealthiest Americans to pay much more, there was no consensus within the party to pass legislation levying taxes on the 1%.
private equity
Private equity fund managers were able to dodge a tax hike that Senator Joe Manchin wanted, but Senator Kyrsten Sinema of the Center Democrats insisted on being left out of the bill. Manchin wanted to limit a tax break known as carried interest, which allows fund managers to pay lower rates of capital gains on their profits. The private equity industry scored an additional victory just before the bill's final passage, when a handful of Democrats broke with their party to vote on a Republican amendment that would provide a spin-off for private equity firms at the corporate minimum tax .
Manchin, Sinema
All of the bill's content was essentially chosen by Manchin and then modified to suit Sinema's preferences. The two moderates have exerted tremendous pressure with their willingness not to accept any legislation at all – and attacks from progressives – rather than accepting a bill with provisions they oppose. The two were also able to secure some direct benefits for their states as part of the negotiations: Manchin secured an agreement to authorize the completion of Equitrans Midstream Corp.'s Mountain Valley Pipeline, and Sinema was able to secure $4 billion for drought relief in western states.
Manufacturers of electric cars
The deal extends a popular $7,500 per vehicle excise tax credit for EV purchases, a win for EV makers like General Motors Co., Tesla Inc. and Toyota Motor Co. But to garner Manchin's support, companies need to get involved keep up with strict requirements for sourcing new batteries and critical minerals that could render credits useless for many manufacturers for years. Not all manufacturers benefit from the credit. New cars costing more than $55,000 and $80,000 for pickups and SUVs do not qualify for the credits.
Renewable energy
Solar company Sunrun Inc., energy storage and software provider Stem Inc., and hydrogen and fuel cell company Plug Power Inc. benefit from generous tax credits in the bill. Nuclear reactor operators such as Southern Co., Constellation Energy Corp., Public Service Enterprise Group Inc. and Energy Harbor Corp. could also benefit from a $30 billion production tax credit for nuclear energy suppliers.
oil companies
Oil and gas got a boost alongside newer energy sources. The bill, which could mandate more federal oil and gas lease sales and increase an existing carbon capture tax credit, was supported by companies including Exxon Mobil Corp. and Occidental Petroleum Corp. praised. The legislation creates a new 10-year product tax credit for hydrogen production, increasing to as much as $3 per kilogram depending on carbon intensity.
Medicare, Obamacare enrolled
The final bill caps the out-of-pocket cost of prescription drugs for seniors at $2,000 per year and allows Medicare to negotiate prices for 10 drugs four years from now. The bill avoids a big January hike in Obamacare premiums for many middle-income people by extending the subsidy by three years.
Deficit Hawks
Manchin negotiated a $300 billion deficit reduction into law, the first major effort by Congress in 11 years to narrow the gap between the country's spending and tax revenues. The deficit cuts are small compared to the $24 trillion in debt, but hawks say it's a start.
The tax office
The Internal Revenue Service will receive an inflow of $80 billion over the next decade to expand its auditing capabilities and improve technology systems after years of underfunding.
LOSER:
republican
Confident about having beaten Biden's tax and climate agenda, the GOP was stunned in late July when Schumer and Manchin announced a deal. Although they are still the favorites to win seats in the midterm elections, passage of the bill is a major setback to the GOP's political goals. However, it does give them a new theme to promote in the fall campaigns.
pharmaceutical company
The bill will allow Medicare to negotiate drug prices with drug companies for the first time, a change Congress has been discussing for decades with limited success, partly because of the power of the drug lobby. The pharmaceutical industry won a partial victory after the Senator blocked part of the bill that would have capped drug price increases in the commercial market. Drugmakers are likely to offset some of their lower Medicare negotiation revenue with higher prices for privately insured patients.
tech company
Tech companies will bear the brunt of the proposal's two big tax increases -- a minimum tax of 15% on year-end profits and a new levy on share buybacks. Companies like Alphabet Inc.'s Google and Meta Inc.'s Facebook have both been able to cleverly use the tax law to reduce the taxes they owe while still being profitable. The minimum tax is intended to increase taxes on companies that report large profits to shareholders but can claim many deductions and credits to trim their IRS bills.
The SALT caucus
The legislation does not provide for an expansion of the $10,000 cap for state and local withholding tax, or SALT. The omission comes as a blow to residents of the high-tax Northeast and West Coast states and Representatives Josh Gottheimer of New Jersey and Tom Suozzi of New York, who led the effort to increase depreciation.
Bernie Sanders
The $437 billion in spending is a far cry from the $6 trillion envisioned by progressives led by Senator Bernie Sanders at the start of Biden's presidency. The bill bars any proposals for new welfare programs, including childcare, tuition-free college, housing spending and an expanded monthly child tax credit.
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