Thursday, April 1, 2021
"Senate Democrats are circulating a plan that would trigger tax bills on the assets of the wealthy after they die as the lawmakers seek new sources of revenue to fund trillions of dollars in infrastructure spending and social programs."
The legislation seeks to end a part of the tax code that allows assets to be passed onto heirs without "immediately generating tax bills." Democrats have long been aiming at these assets to be taxed. Joe Biden's campaign has encouraged the idea.
Under current tax law, people are able to pass assets to their heirs without transferring capital gains from the property's appreciation, referred to as "stepped up basis at death." Basically, heirs will not have to pay taxes "on any of the gains that accused under the previous owner."
Under the new plan, taxes would be levied on those assets of the wealthy at death subject to a $1 million exemption.
According to Chris Van Hollen of Maryland, “The stepped-up basis loophole is one of the biggest tax breaks on the books, providing an unfair advantage to the wealthiest heirs every year. . . “It’s time to stop subsidizing massive inheritances for the rich and start investing in everyday Americans.”
This stepped up basis tax provision has become increasingly popular for the Democratic Party, although, under President Barack Obama, the proposal was blocked by Congress.
With recent changes in the Senate and the House, it'll be interesting to see where the new proposed legislation goes.
See Laura Davison, Democrats Weigh Capital Gains Tax Hike For Millionaires At Death, Financial Advisor, March 30, 2021.
Special thanks to Joel C. Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.