President Joe Biden’s American Families Plan contains multiple significant tax increases, including ending the “stepped-up basis” tax preference critical to helping business survive the loss of a loved one or business partner.
In April, President Joe Biden unveiled his American Families Plan, which contains multiple significant tax increases, including ending a tax preference known as "stepped-up basis" that allows people to pass investments to heirs tax-free at the time of their death.
In response, the Big “I" joined a number of small business organizations in sending a letter to the leadership of the U.S. Senate Committee on Finance and the U.S. House Ways and Means committee showing support for the continuation of stepped-up basis.
This procedure is critical to helping businesses survive the loss of a loved one or business partner. Repealing the stepped-up basis by imposing capital gains taxes when assets transfer ownership at death would force many family-owned businesses to liquidate assets or lay off employees to cover the burden. This new tax would be imposed on top of any existing estate tax liability, further compounding the negative impacts and creating a second tax at death.
The letter to the committee leaders highlights a study from Ernst & Young that illustrates the economic damage that repealing stepped-up basis and imposing a tax on unrealized gains at death would inflict. The study forecasts that 80,000 jobs would be lost in each of the first 10 years and gross domestic product (GDP) would decrease by $100 billion over 10 years. Additionally, for every $100 of revenue raised via taxing capital gains at death, $32 would come out of workers' paychecks.
As President Biden and congressional Democrats consider ways to pay for their spending priorities, the Big “I" will continue to strongly advocate against raising taxes on small businesses and Big “I" members.
Wyatt Stewart is Big “I" assistant vice president of federal government affairs.