President Biden is committed to getting rich Americans to raise capital gains taxes when they die before they can pass on wealth to their descendants, say people familiar with the matter.
Why is that possible?Eliminating the so-called boost is crucial to finding additional revenue in Biden’s plan to pay about $ 1.5 trillion in new spending that he will present during a keynote speech Wednesday night.
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“Profits can be taxed at the time of death when you raise the maximum capital gains tax rate,” said Leonard Burman, of the Urban Institute’s tax policy center. “Otherwise, rich people would resort to fraud to keep assets until death, avoiding a 43.4% (plus state tax) rate.”
“If you, too, end up dying step by step (as Biden suggests), the rate of revenue maximization is much higher, probably above 43.4%,” wrote Jason Furman, chairman of President Obama’s Board of Economic Advisers. , wrote on Twitter,
The offer is expected to raise $ 370 billion, but only if the reinforced base is removed.
The intrigue. During the campaign, Biden proposed raising real estate taxes from 40% to 45%, while sharply reducing the tax-exempt inheritance from $ 11 million to $ 3.5 million.
During the first 100 days of his presidency, White House officials remain silent if Biden proposes real estate tax changes in his next package.
The use of an enhanced basis means that when assets are transferred to the heir, they are revalued to their present value for further tax purposes.
In practice, this means that an increase in the value of an asset is never taxed as capital gain during the life of the owner, although real estate taxes could still be levied after the owner dies.
Keeping up with the newsAhead of Biden’s joint address to Congress, officials say his plans are aimed at targeting the wealthy.
“It’s not the top 1%, not even the first half of 1%,” said Brian Dees, director of the National Economic Council, of the president’s capital gains proposal.
Diz also tried to refute the argument that almost doubling the interest rate on capital gains would slow economic growth.
“There is no evidence of a significant effect of capital gains on the level of long-term investment in the economy,” he said.
In numbers:Biden’s plan, taxable income at the same rate, could actually increase the deficit, according to analysts at the University of Pennsylvania’s Wharton budget model.
An increase in the rate of capital gains from 20% to 39.6% could cost the Government $ 33 billion over 10 years if the basis for strengthening remains the law.
If the amplified basis is removed, ները assets are taxed at death, before they are transferred, the IRS will raise $ 113 billion.
Go deeper. There is a debate among economists about what the maximum level of return on capital should be, even if the strengthened base is not eliminated.
According to David Herzig, Director of Taxation at Ernst & Young’s Private Customer Service, the deal ranged from 28% to 32%.
But those calculations have to be reformulated if the extra degree is removed from the book.
“In the absence of a gradual death rate, we estimate it to be in the low 40s,” said Von Rico, an associate professor at Penn Wharton Budget Model.
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