A top farm state Democrat is among those who oppose President Joe Biden’s proposal for a new inheritance tax to help pay for his $3.5 trillion social welfare expansion, The Washington Times reported.
House Agriculture Committee Chairman David Scott, a Georgia representative, has been warning ever since the proposal was made that the tax will hurt family farms and his concerns have not been allayed now that the plan is set to be voted on by the House.
The proposal, which of all Biden’s plans for tax increases would have the greatest impact and raise an estimated $800 billion in revenue, would alter the way capital gains are calculated on inherited assets worth more than $1 million by taking a bigger chunk out of inherited stocks, real estate, businesses, and farms.
Progressive Democrats have praised the proposed repeal of what is known as step-up basis so that, they say, millionaires and billionaires would finally pay their fair share. The calculation would apply the capital gains tax to the increased value of an asset during the deceased’s lifetime. Inheritance currently is subject to a capital gains tax on the asset’s value at the time of death, or its step-up basis.
The left-leaning Center on Budget and Policy Priorities argues that the current inheritance tax is unfair, because it allows those who are rich enough to own valuable real estate, stocks, or businesses escape taxes as their wealth grows, giving Amazon founder Jeff Bezos as an example, according to the Times.
At death, under current tax law, Bezos’ heirs would not have to pay taxes on the approximately $100 billion that his Amazon stock generated from 2010 to 2018.
But many farmers say such a change would be a death toll for their livelihood.
For example, Pat McDowell told the Times that the tax would mean the end of the ranch he owns with his two brothers in central Texas, which they want to pass on to their niece to keep it in the family, as it has been for five generations.
But if the proposal is approved, McDowell said his niece would have to sell off part of the ranch just to pay the new tax and there might not be enough ranch left to have a profitable business.
The Agriculture Department said that the federal government already has a tax on the total value of an inheritance, but only 50 of 31,000 farms whose owners died last year were subject to it, a number which would go up substantially under Biden’s proposal.
The tax kicks in when the deceased has a net worth of $11.7 million or more, and it applies a 40% tax after the first $1 million in taxable assets, according to the Times.
The Biden proposal would apply a 40.8% capital gains tax to inherited assets with an exemption for the first $1 million and another $250,000 exemption for a personal residence. Married couples would get a $2 million exemption and the exemption for their residence.