Moderate Congressional Democrats Balk At Biden’s Proposed Capital Gains Tax On Inherited Assets
Moderate Congressional Democrats are expressing concern over the Biden Administrations proposed tax proposals including a plan to eliminate the stepped-up basis for unrealized gains at death that would impose a tax capital gains over $1 million on inherited assets.
In a letter to House Speaker Nancy Pelosi (D- CA) and other House leaders, thirteen Democratic lawmakers said the requirement to recognize capital gains at death runs the risk of forcing small businesses and family farms to sell off assets rather than pass them down to the next generation.
The letter, authored by Representatives Cindy Axne (D-IA) and Jim Costa (D-CA) went on to say, “We strongly urge you to provide full exemptions for these family farms and small businesses that are critical to our community.”
Democrats hold a narrow majority in the House and a 50-50 split in the Senate with Vice President Kamala Harris having the tie-breaking vote. Republicans are unified in resisting tax increases.
If the Democrats use a parliamentary maneuver to avoid a Republican filibuster in the Senate, they will need to maintain the support of all 50 democrats to get the President’s tax proposals through Congress.
The recent letter from House Democrats shows that could be a challenge when it comes to tax proposals needed to fund the $1.8 trillion American Families Plan which would expand childcare, nutrition, education and health care and other programs.
A summary of the American Families Plan indicates that high capital gains taxes would not apply to family farms and small businesses that are bequeathed to heirs who continue to run them, but critics say the carve-out could be difficult to execute given the details of inheritance.
In addition to ending stepped-up basis, Biden’s tax proposals include raising the highest income tax rate for families making more than $400,000 annually and adjusting the capital gains rate to that level as well as a health care surcharge for families making more than $1 million annually.