President Joe Biden’s American Families Plan proposes changing the tax rules that allow a “step up” in basis for inherited assets.
Currently, when taxpayers inherit assets that have appreciated in value over the years, the person who inherits the property is allowed to increase the asset’s basis to the fair market value of the property at the date of the owner’s death. Generally, the law allows the inheritor to immediately sell the property without any capital gains liability. Biden’s proposal would substantially limit the availability of the step-up in basis for most wealthy families.
We asked two professors and authors of ALM’s Tax Facts with opposing political viewpoints to share their opinions about the proposed changes to the stepped-up basis rules.
Below is a summary of the debate that ensued between the two professors.
Bloink: Ending the step-up in basis would close a major loophole that really benefits only very wealthy families who have the means to hold onto appreciating assets for years — only to pass them down to future generations with little to no tax liability. The step-up allows the rich yet another way to avoid paying their fair share of taxes by eliminating taxes on even transfers of capital assets.
Byrnes: Eliminating the step-up in basis would be devastating for this country’s struggling economy. Studies show that it would drastically cut the number of jobs available for hardworking Americans each year and actually cause a $10 billion decrease in the GDP each year. Simply put, it would do more harm than good and would generally punish Americans whose families have worked hard to provide a legacy for future generations.