Wednesday, April 21, 2021
A new report that was released on Tuesday shows that "repealing the step-up in basis tax provision would damage the gross domestic product (GDP) and significantly decrease job creation." The study found that middle-class, family-owned businesses would be hit the hardest by the repeal.
As of now, a person that inherits assets is not taxed on the appreciation that happened before they inherited them. This is particularly important for family-owned farms and small businesses or manufacturers because if they are forced to pay capital gains that were accrued by the pervious owner, their business would be at risk.
The study found that repealing the step-up in basis would result in:
80,000 fewer jobs in each of the first ten years;
100,000 fewer jobs each year thereafter; and
A $32 reduction in workers’ wages for every $100 raised by taxing capital gains at death.
It would also reduce GDP relative to the U.S. economy in 2021, by approximately:
$10 billion annually;
$100 billion over 10 years.
According to Doug Bibby, President of the National Multifamily Housing Council, "[r]epealing stepped-up basis is not a free lunch for those looking to generate tax revenue and would have significant consequences in the multifamily marketplace." Bibby also mentioned that, absent stepped-up basis, the resulting depreciation recapture and capital gains taxes placed on heirs could "exceed their ability to pay without selling the asset."
See Study Shows Repealing Stepped-Up Basis Would Damage the Economy, American Farm Bureau Federation: Newsroom, April 20, 2021.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.