Few people can claim to have decided the fate of global tax reform, but Joe Manchin and Kyrsten Sinema can do just that. The two Democrats almost derailed US tax reform by refusing to support the Inflation Reduction Act until the summer of 2022.
The Biden administration had to fight tooth-and-nail to get the bill through Congress, but it was Manchin and Sinema rather than the Republican Party who held up tax reform. Taking advantage of the slight Democratic majority, the two senators were able to demand concessions.
The result was a series of compromises on detail such as the elimination of a carried interest tax increase, which would have hit private equity funds. Eventually the Inflation Reduction Act made it through Congress in August 2022.
If Manchin and Sinema had not accepted this compromise, the 15% rate would have been relegated to the history books rather than become part of US tax law. However, it looks like wider tax reform may be off the agenda.
Although Manchin and Sinema may hope to be as influential in 2023, the US looks set for political gridlock following the November midterm elections.
