Inside the $40-billion-a-year tax 'loophole' President Biden's plan would eliminate.
The federal tax code contains a loophole so big that in the time you spend reading this article, it will have saved wealthy families and their heirs an average of about $400,000. Over the course of a day, the average total savings is more than $100 million.
Biden, who advocated removing the provision while on the campaign trail, continued attacking it this month in an address he made in support of his plan. However, the U.S. Senate publishes a yearly report that includes an estimate of the impact of the stepped-up basis on Americans, and according to that report the top earners benefit the most from this part of the tax code.a report from the Family Business Estate Tax CoalitionEstates of more than $11.7 million do not benefit from the stepped-up basis and are subject to the estate tax, which taxes about 40 percent of an estate’s worth. The tax used to start at $5.
“Middle-income people spend most of their assets before they die, whereas high-income people have more wealth than they can spend,” said Leonard Burman, a co-founder of the Urban-Brookings Tax Policy Center, who contributed data to the Senate’s predictions. “So the more unequal wealth becomes, the more assets you’ll find are being passed tax-free.”
Schoenberg said he favors throwing out the stepped-up basis rule, and supports taxing assets in full at inheritance. He concedes that getting there is a lot harder than it sounds.