Senate Republicans are urging President Joe Biden not to go forward with a plan to raise the capital gains tax on wealthy individuals making more than $400,000 per year.
The Biden plan would increase the top capital gains tax rate for people making over $400,000 from the current 20% to 39.6 percent. Capital gains taxes are taxes on the sale of a property or investment. The Senate Republicans say this could hurt family-owned businesses, as well as farms and ranches.
“These [proposed] changes are a significant tax increase that would hit family-owned businesses, farms, and ranches hard, particularly in rural communities,” a group of Republicans senators wrote in a letter to Biden. “These businesses consist largely of illiquid assets that will in many cases need to be sold or leveraged in order to pay the new tax burden. Making these changes could force business operators to sell property, lay off employees, or close their doors just to cover these new tax obligations. The complexity and administrative difficulty of tracking basis over multiple generations and of valuing assets that are not up for sale will lead to colossal implementation problems and could also lead to huge tax bills that do not accurately reflect any gains that might have accumulated over time.”
The letter was spearheaded by Sens. Mike Crapo (R-ID), ranking member of the Senate Finance Committee, along with finance committee members Sens. John Thune (R-SD) and Steve Daines (R-MT). They also have the support of Senate Republican Leader Mitch McConnell (R-KY) and the GOP caucus.
“Passing on the family farm to the next generation is a top priority for many farmers and ranchers,” Zippy Duvall, president of the American Farm Bureau Federation, said. “Eliminating stepped-up basis and increasing capital gains taxes will make it much more difficult, or even impossible, for parents to pass on their farm or ranch to their children. This is a critical tool for America’s farmers and ranchers, and we urge all members of Congress to oppose efforts to eliminate it.”
The National Federation of Independent Business, National Cattlemen’s Beef Association, Family Business Estate Tax Coalition (FBETC), the Policy and Taxation Group, Associated General Contractors of America, National Association of Manufacturers, and the U.S. Chamber of Commerce are among the organizations opposed to the tax hike.
“At a time when small businesses are working to recover from the COVID-19 pandemic, repealing stepped-up basis would be a devastating setback for family-owned businesses,” Courtney Titus Brooks, senior manager of federal government relations at National Federation of Independent Business, said. “The current proposal to eliminate stepped-up basis would cause significant job losses and would leave heavy tax burdens on future generations. Small businesses thank Senators Thune, Daines, and Crapo for advocating on behalf of family-owned businesses and urge Congress to keep this important policy in place.”