Research

The Biden administration’s proposals to increase taxes on capital gains are, as a group, the most economically harmful in terms of their adverse impact on GDP per dollar of revenue either over the 10-year budget window or in the long run.
Policies that increase taxes tax on capital income (i.e., capital gains, dividends, and the corporate income tax rate) are found to be more harmful than those that, at least in part, also increase taxes on labor income.

Repealing the “step-up in basis” at death and taxing unrealized gains of trust assets will likely force households with limited access to liquidity to take out significant loans to pay a portion of the new federal tax on inherited assets.
Wall Street banks, who will provide the loans, stand to net approximately $38 billion in income through interest payments and fees on borrowers over a 10-year period.
Households inheriting or holding $1+ million in unrealized capital gains could be forced to liquidate family assets to cover the tax.

83% of small business owners believe elected officials should support tax policies that make it possible to pass on their family business.
78%, of small business owners believe retroactive capital gains taxes on assets passed on to beneficiaries following a business owner’s death will have crippling consequences for small businesses.
65% of small business owners believe tax increases should not be considered until the economy fully recovers from the pandemic.

Sustained annual job losses ranging from over 500,000 to almost 1 million;
10-year losses in economic output and GDP of about $2 trillion and $1 trillion, including more than $600 billion loss in private investment and R&D spending;
10-year loss in personal income of about $1 trillion, which translates to $8,000 – $10,000 per household.

Under the STEP Act, 92 of the 94 representative farms would be impacted, with additional tax liabilities incurred averaging $726,104 per farm.
If both the STEP Act and the 99.5% Act were simultaneously implemented, 92 of the 94 representative farms would be impacted, with additional tax liabilities incurred averaging $1.43 million per farm across the 92 representative farms.

Decreased job equivalents by approximately 80,000 jobs in each of the first ten years; and 100,000 jobs annually thereafter.
For every $100 of revenue raised by repeal via tax at death, the wages of workers would decline $32.
Decrease in U.S. GDP by $10 billion annually or $100 billion over 10 years.

Impact 50 percent to 70 percent of Illinois grain farms, with an average transfer tax liability of over $500,000 for those farms. Almost one-fifth would face over $1 million in transfer tax liabilities.
The largest share of farms would owe between $1,000 and $5000 per acre in transfer tax.
Collectively these farms would owe nearly $400 million in a new tax that does not currently exist.

Nearly 9 out of 10 (87 percent) farmers said they expect capital gains rates to rise over the next five years.
Three-fourths of producers said they are “very concerned” about the possible elimination of the step-up in cost basis for farmland in inherited estates and just over two-thirds (68 percent) of respondents said they are “very concerned” about a possible reduction in the estate tax exemption for inherited estates.
82 percent of producers said they are “very concerned” that changes in tax policy being considered by Congress will make it more difficult to pass their farm on to the next generation of farmers in their family. An additional 13 percent of respondents said they are “somewhat concerned,” suggesting this issue is on the minds of nearly all ag producers.

Raising the top statutory rate on capital gains to 39.6 percent would decrease revenue by $33 billion over fiscal years 2022-2031. If stepped-up basis were eliminated, then raising the top rate to 39.6 percent would instead raise $113 billion over 2022-2031.

The Sensible Taxation and Equity Promotion (STEP) Act would have two impacts on farmers if passed as currently understood. Removing the automatic step-up in basis provisions at the time of death creating the potential for more tax. A new transfer tax instituted in the STEP Act would apply to transfers of property in a farm estate at death and transfers during a lifetime.