Congressional Democrats are crafting a plan to create a massive new death tax. The zombie tax proposal would retroactively hit family farms, small businesses, homes, and trusts. It would also violate President Biden’s pledge not to increase taxes on anyone making less than $400,000.
This unprecedented plan would jeopardize the jobs of untold numbers of Americans working for farms, ranches, and small businesses. In addition to being bad economic policy, the Congressional Democrats’ tax proposal is unfair and completely unprecedented in American history.
Unfair: Taxing Sales That Never Even Happen
The so-called STEP Act would force people to pay taxes on imaginary gains from property that has never been sold. In other words, families will have to pay taxes for sales that never actually occur.
Here’s how it works: If a family receives a home, farm, or small business when their parents die, the government will treat that property as if it had been sold for a profit even if the family maintains the asset. That means the heirs would have to pay a giant tax on their property whether they sold it for a profit or not. This unfair provision could force families to sell farms or businesses that had been passed down for generations just so they can afford a tax on a sale that never actually happened.
Unprecedented: Retroactively Taxing Families 21 Years into the Past
For the first time in history, the STEP Act would impose new taxes on financial transactions that occurred decades ago.
The plan taxes individuals on the value of property transferred up to 21 years ago. That means that a family who inherited a farm or small business from a loved one 21 years ago would be subject to a retroactive tax on that property value. Surviving generations must now figure out how to pay those taxes even though there was no such law when they inherited the property decades ago.
This massive retroactive tax could force people to sell farms, businesses, and homes that had been in their family for generations to pay a retroactive tax that has never existed. It violates the long tradition of U.S. tax law by applying taxes retroactively.
Broken Promises: Biden’s Pledge Not to Tax Anyone Under $400,000
Despite President Biden’s repeated promise that he will not increase taxes on anyone making $400,000 or less, Congressional Democrats’ STEP Act would clearly hit middle income Americans.
New taxes in the bill are based on the value of a transferred property, not the income of the person who receives that property. A family making well below the $400,000 income level could be hit with a massive tax increase if their parents left them a farm or home at death. This would apply even if the property were simply being held by the family. This is an unfair bait and switch from Congressional Democrats that cannot be allowed to move forward.