Former Democratic senator ‘warns’ Biden’s tax system


Former Democratic Senator Heidi Heitkamp, ​​one of the party’s key tax policy voices, has proposed that President Joe Biden tax assets valued at the time of his death on farms and family businesses. Said to damage the.

“I’m trying to sound an economic and political warning to Democrats that this is not the way to go,” she said in an interview with Squawk Box. “The turmoil this brings to small families and the wealth of farmers and families is not worth it. “

Biden proposed to tax assets valued at the time of death for income over $ 1 million. He also proposed raising the capital gains tax to the standard income tax rate. The plan will be discussed within the framework of a parliamentary regulation bill. In his proposal, individuals who inherit millions of private companies of value and real estate could face an immediate capital gains tax of more than 40% without having to sell them.

Now, in what is known as the “base increase”, an individual can inherit a valued asset without paying taxes, and the value is “upgraded” at the current valuation, to the benefit of individuals. interests of the tax deceased. Wipe off. For Biden and many progressive Democrats, the escalation is a huge loophole for the wealthy, with millionaires and millionaires giving their businesses and assets to their families for generations without paying capital gains taxes. They say it will be possible to pass.

Heitkamp, ​​who served in the Senate until 2019, chairs a new nonprofit called Save America’s Family Enterprises (SAFE). The nonprofit is campaigning against the proposal and running family ads. Neither the high camp nor the group revealed the donor.

“Unearned income should not be taxed at a much lower tax rate than income,” said Heitkamp, ​​supporting raising the capital gains tax to a tax rate normal. She also basically prefers to eliminate step-ups. Therefore, the asset does not reach the new valuation when inherited, but retains its original basis when sold.

She said her opposition to Biden’s plan was immediate imposition after death. She explained that families should only pay capital gains taxes when their assets are sold and the profits are made.

“What I find most annoying is that, for the first time, I am suddenly taxing unrealized capital gains,” she said. “My position has always been that you have to make capital gains. “

She gave the example of a truck driver named Sam, whose family has owned a cabin on a lake in Minnesota for generations and whose value has skyrocketed over time due to gentrification. The wealthy buyer next door buys land for $ 2 million and builds a mansion for $ 2 million. If both died, the wealthy landowner would give his property over to his family and could not pay taxes as they had a high current base. But Sam’s family could pay millions in taxes upon his death, even if the family didn’t sell the property.

She said the same applies to family businesses and farms.

“Family assets are more than a balance sheet,” she said. “Family assets are where we work, where we live and where we recreate ourselves. Given the taxation of unrealized capital gains, what you are doing is Pandora’s long-standing unclosed To open the box. “

The White House has said family farms and family businesses are exempt from taxes until the property is sold. Families also have up to 15 years to pay taxes to ease the pressure on them to sell immediately. According to a White House analysis, couples can be exempted up to $ 2.5 million if real estate is included, so only the richest 0.3% of taxpayers have to pay taxes.

Howard Grecman, a senior fellow of the Urban Brookings Tax Policy Center at the Urban Institute, said Biden’s plan to tax assessed assets on death is important to the overall plan to raise capital gains to income rates normal. I said it was a game. Instead of taxing assets assessed at the time of death, he said, wealthy families only hold assets indefinitely to avoid higher taxes on capital gains.

“Biden’s proposal to raise the capital gains tax rate to the normal tax rate would have an unpleasant economic effect, with little income and somehow unrealized at the time of death,” he said. declared. “If you take it up a notch, you won’t be taxed until your heir sells it. It’s decades after the death of the original investor. Lockdown has been around for generations. Investment can get stuck in underperforming assets. ”

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