Democratic Senator Joe Manchin on Monday objected to President Biden’s infrastructure investment funding legislation by raising the corporate tax rate to 28 percent. Derailing the tax hike would be a lucrative gift to both corporate CEOs in general and private equity giants whose executives funded the legislature’s 2018 campaign and funded a super PAC that bolstered its highly competitive re-election bid.
On Monday, Manchin discussed Biden’s infrastructure plan with West Virginia MetroNews, stating, “If I don’t vote, it’s going nowhere.”
“Since the bill exists today, it needs to be changed,” said Manchin. While Biden’s plan is to raise the corporate tax rate from 21 percent to 28 percent, Manchin believes that the corporate tax rate should be closer to 25 percent for the United States to be “competitive.”
On Monday, Senator Ron Wyden, D-Oregon, told reporters that the Democratic Caucus and the Senate Finance Committee will be working together to set a final corporate tax rate. However, the change proposed by Manchin would have a huge impact on the payment of the Biden infrastructure plan while largely maintaining a tax policy that brings disproportionately large profits to a tiny handful of large corporate executives.
Last month, the Daily Poster reported on a recent study by Grinnell College economist Eric Ohrn that found that for every dollar that public companies benefit from corporate tax cuts, “the remuneration of the company’s five highest-paid executives increases by 15 to 19 cents “. This study preceded last week’s revelations that fifty-five publicly traded companies had paid no corporate taxes in the past year.
Manchin’s move could also benefit private equity firms in particular that switched from partnership structures to C Corporations to take advantage of former President Donald Trump’s tax law that cut the corporate tax rate from 35 percent to 21 percent.
Such conversions allow private equity firms to attract capital from larger numbers of institutional investors who may not have been permitted to invest in partnerships. However, private equity firms had not converted until a lower corporate tax rate made the move even more profitable. The conversions are effectively permanent.
Ares Management was the first private equity giant to go from a partnership structure to a C corporation. The company’s executives were among his top donors when he was re-elected in 2018. In total, they have allocated more than $ 21,000 to his re-election campaign this year. This emerges from federal records verified by the Daily Poster.
Data compiled by OpenSecrets shows that this was part of more than $ 212,000 that the private equity and investment industries delivered to Manchin during an election cycle in which he was funded by a large private equity group that campaigned for taxes picks up getting a small business investment award has problems.
The Blackstone Group and the Carlyle Group have also moved from partnerships to C Corporations. Executives at these firms donated $ 4.4 million to the Senate Democratic Super PAC, the Senate Majority PAC, during the last two election cycles, including $ 1.3 million in 2018 when Manchin was re-elected with the group’s support.
A change in tax rates now could affect the profits of these private equity firms. Ares, Blackstone and Carlyle have recently advocated federal tax issues, according to the latest federal data.
While Manchin has struggled to keep the corporate tax rate low, Ares has warned investors that “material changes in national or international corporate tax policies, regulations or guidelines, enforcement measures or legislative initiatives can adversely affect our business”.
There was initially talk of Biden’s tax plan, which contained provisions to close the so-called private equity tax gap, but that language was excluded from the initiative.