The Biden administration’s proposal to dramatically expand the inheritance tax bill for wealthy Americans is running into some headwinds with Democrats on Capitol Hill, showcasing nervousness about the scope and size of elements of the White House’s ambitious tax plans.
President Joe Biden’s sweeping expansion of social spending programs would be financed in part by tax hikes on the rich. A key element of that is ending “step-up in basis,” which allows heirs to use the market value of assets at the time of inheritance — rather than the historical purchase price — as the cost basis for capital gains.
Instead of hitting heirs with a hefty tax payment at the time of the death of their benefactor, staff for House Ways and Means Chair Richard Neal have floated allowing the beneficiaries to defer the bill as long as they hang on to the asset, according to people familiar with the matter.
That possibility was presented on a Tuesday call with progressive groups and tax policy experts, according to the people, who spoke on condition of anonymity as the discussion was private.
Asked about the call, Neal, a Massachusetts Democrat, said in a statement, “When Treasury releases its Green Book in the coming weeks, I look forward to reviewing the administration’s various revenue proposals and working with other Ways and Means members to chart a path forward.”
The so-called Green Book is a report from the Treasury Department that’s expected to detail the Biden tax plans, which have so far been released only in outline form.
The White House declined to comment.
A separate push by the Biden administration to raise the corporate tax to 28% from 21% met with a call from moderate Senator Joe Manchin of West Virginia for a less dramatic increase. Biden has also proposed boosting the top income tax rate and the capital gains rate for those earning more than $1 million.
The change floated by Neal’s staff would give beneficiaries of large estates the incentive not to sell, known as the lock-in effect, and it would mean bringing in less money to pay for Biden’s $1.8 trillion American Families Plan. The Urban-Brookings Tax Policy Center estimates that Biden’s capital-gains proposals, including taxing unrealized gains at death, would generate $372.7 billion over a decade.