More than 130 Republican House members sent a letter to leadership on Wednesday, opposing to the use of two tax provisions—the elimination of stepped-up basis allowances from the tax code and capital gains taxes at death—which could be offered as pay-fors under President Biden’s “American Families Plan” proposal.
“A recent EY study found that these two changes to the tax code had the potential to reduce wages by $32 for every $100 in new taxes collected, and to eliminate 80,000 jobs per year right now, and up to 100,000 per year by 2030,” the letter explained.
The allowance for stepped-up basis applies uniformly to all taxpayers, protecting all families from unnecessary economic and administrative burdens upon the death of a loved one, the letter said. In addition, since its inception, capital gains taxation has recognized that the appropriate time to tax gains on an asset is when that asset is sold.
“Unlike the estate tax, repealing stepped-up basis and applying capital gains at death, even with an exemption threshold, would create a massive new administrative burden for nearly every American family, farm, and small businesses,” the lawmakers wrote.
Administrative burdens aside, the letter expressed concern over the impact applying this new tax would have on employment at a time when the economy is working to rebound from the COVID-19 pandemic. Assets such as manufacturing equipment and farmland are not liquid and can be difficult to unwind and would likely result in closure of farms and small businesses in order to pay it at a time when small business jobs are most needed, the lawmakers explained.
“We agree 21st century transportation networks, utilities and broadband are vital to economic growth as we rebuild our economy and get Americans back to work. We also believe repealing stepped-up basis and taxing capital gains at death would be counterproductive to these goals,” the lawmakers wrote. “We oppose their inclusion in any legislation, and we look forward to working with you on ways to responsibly fund the improvements needed to ensure America’s farms, ranches, and small businesses fully benefit and can continue serving their customers here and around the world.”
USDA clarified that Biden’s policy proposal specifically exempts farm operations from this new capital gains tax, as long as the farm remains family owned and operated, the National Pork Producers Council (NPPC) noted in Capital Update.
A copy of the lawmakers’ letter is available here.
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