Biden has promised to raise capital gains taxes through a “step-up base”

President Biden promises to increase capital gains taxes for the wealthiest Americans, according to those familiar with the matter, when they die before they pass wealth to their heirs ..

Important reason: Eliminating the so-called step-up base is central to Biden’s plan to find additional income to pay for new spending of about $ 1.5 trillion, which will be revealed in a major speech on Wednesday night.

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  • Leonard Berman of the Urban Institute’s Tax Policy Center said: “Otherwise, the rich will retain their assets until death and will experience distortions to avoid the 43.4% (and state tax) rate.”

  • Jason Furman, chairman of President Obama’s Council of Economic Advisers, said: Written on twitter..

  • The proposal is estimated to raise approximately $ 370 billion, but only if the reinforced foundation is eliminated.

conspiracy: During the campaign, Biden proposed raising the estate tax from 40% to 45% while dramatically reducing the tax exemption from inheritance tax from $ 11 million to $ 3.5 million.

  • For the first 100 days after the inauguration of the president, White House officials remain silent as to whether Biden will actually propose an inheritance tax change in the next package.

  • Using a step-up base means that when an asset is passed on to an heir, it will be revalued at its current value for future tax purposes.

  • In reality, that means that an increase in the value of an asset will never be taxed as a lifetime capital gain on the original owner, but inheritance tax may apply at the time of the owner’s death. There is.

Promotion of news: Prior to Biden’s joint speech to Parliament, authorities emphasized that his plan was designed to target the ultra-rich.

  • “Neither the top 1% nor the top half of the 1%,” said Brian Deese, president of the National Economic Council, about the president’s capital gains proposal.

  • Deeds also sought to refute the argument that doubling the capital gains rate would slow economic growth.

  • “There is no evidence that capital gains have a significant impact on the level of long-term investment in the economy,” he said.

With numbers: According to a study by an analyst at the University of Pennsylvania Wharton Budget Model, Biden’s plan to tax capital gains at the same rate as income could actually increase the deficit.

  • Raising the maximum capital gains rate from 20% to 39.6% could cost the government $ 33 billion over a decade if the tightened standards remain legal.

  • However, if the tightened standards are eliminated and the property is taxed at death before it is transferred, the IRS will collect $ 113 billion.

Dig deeper: There is debate among economists about what capital gains earnings maximization should be, even if the step-up base is not eliminated.

  • According to David Herzig, head of personal customer service tax at Ernst & Young, the consensus ranged from 28% to 32%.

  • However, these calculations need to be reconstructed if the stepped-up criteria are removed from the books.

  • John Rico, Associate Director of the Pen Wharton Budget Model, said:

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