President Joe Biden recently proposed a change in the federal tax code that would increase the capital gains rate on inherited assets.
According to reports, however, such a move would likely draw opposition from even some members of the Democratic Party.
“Destroy farms and ranches”
Under existing law, individual assets valued at $1 million — or $2.5 million per couple — can be taxed at their value when they were inherited rather than the time they were purchased.
For that reason, assets acquired during the course of a lifetime can accrue value and be passed down to an heir with a minimal tax burden.
Many Democrats oppose the provision and describe it as a loophole that benefits the wealthy, though Republicans point out that farmers and family business owners, among other working Americans, can greatly benefit.
Some moderate Democrats, like Sen. Max Baucus (D-MT), have begun to express concern.
In an opinion piece published on Wednesday by the Wall Street Journal, Baucus described Biden’s plan as one that would “destroy farms and ranches” across the country.
“This is not the path to walk”
“Lawmakers should know this is a mistake,” he wrote. “In 1976 and again in 2010, Congress passed legislation eliminating the step-up in basis. Both times it had to be reinstated because of the devastating effects on family-owned businesses.”
Baucus continued by dismissing “carve-outs” meant to “temper criticism” from critics like himself as proven to be “ineffective” against the deleterious impact on farmers, ranchers, and other taxpayers.
“Congress tried that in 1997 for inherited family-held businesses but the exceptions were too narrow to benefit anyone, and widening them would have been tantamount to repealing the estate tax altogether,” he added.
He is not the only prominent Democrat to express skepticism about plans to do away with the so-called step-up basis.
In a recent statement to CNBC, Sen. Heidi Heitkamp (D-ND) explained: “I’m trying to sound the alarm, both economically and politically, for Democrats that this is not a path to walk. The disruption that it would create for small family business and farmers and family assets is not worth the pain.”