Senate Republican leader Mitch McConnell ripped President Joe Biden’s plan to end a tax break that lets the richest Americans transfer much of their wealth tax-free at death, calling it “a second estate tax.”
Biden’s proposal to boost taxes on capital gains in excess of $1 million is among the tax code changes he wants to make as part of an expansive package of spending on social programs. Current law allows heirs to use the market value of assets at the time of inheritance rather than the actual purchase price as the cost basis for capital gains when the holdings are sold.
“Right now under the estate tax law, if you acquired an asset early in life and it built up in value over the years until you passed away, there’s no tax on the stepped-up basis over the years,” McConnell said. “What they would do is apply a capital gains tax rate to the property that came into your hands over the course of your lifetime.”
Biden’s proposal could cost the heirs of some of the richest people on earth, like Jeff Bezos, tens of billions of dollars in taxes on their unrealized capital gains,
Along with existing real estate exemptions, a couple would need as much as $2.5 million in unrealized capital gains to be subject to tax, according to a White House fact sheet.
“This is a devastating blow to family farms and small businesses all across America,” McConnell said of Biden’s plan. “These are not necessarily rich people. These are people that worked hard throughout their lifetime and would like to be able to leave behind a family farm or their small business to their children.”
Biden’s plan, however, includes an exemption for family farms and other small businesses. That would defer any tax bill for the capital gains on those assets as long as they remain family owned and operated.
Taxes on inherited wealth have been a longtime target of Republicans. McConnell has cosponsored legislation this year with Senator John Thune, the No. 2 Republican, to eliminate the 40 percent estate tax, now charged on the value of estates exceeding $11.7 million and couples double that under the GOP’s 2017 tax law.
