Study Shows Repealing Stepped-Up Basis Would Damage the Economy
A new report released by EY finds that repealing the step-up in basis tax provision would damage the gross domestic product (GDP) and significantly decrease job creation. The study was conducted for the Family Business Estate Tax Coalition, which includes almost 60 organizations representing family-owned businesses.
The EY study found middle-class, family-owned businesses would be particularly hard hit by the repeal. Currently, when someone inherits assets, they aren’t taxed on the appreciation that happened before they inherited them. If family-owned farms, small businesses, or manufacturers are forced to pay capital gains accrued by the prior owner, they would likely face large tax bills that put the future of their business at risk.
According to the study’s findings, repealing the step-up in basis would result in:
- 80,000 fewer jobs in each of the first ten years;
- 100,000 fewer jobs each year thereafter; and
- A $32 reduction in workers’ wages for every $100 raised by taxing capital gains at death.
It would also reduce GDP relative to the U.S. economy in 2021, by approximately:
- $10 billion annually;
- $100 billion over 10 years.
“Farmers and ranchers have been able to pass their farms on to the next generation thanks to the stepped-up basis tax provision,” said American Farm Bureau Federation President Zippy Duvall. “The value of many farms is tied up in land and equipment and most farmers don’t have large amounts of money on-hand to pay capital gains taxes. They could be forced to sell the farm or take out costly loans just to pay capital gains taxes. Eliminating the stepped-up basis isn’t a tax on the rich, it’s a tax on the middle class. We urge President Biden to remain true to his word that he won’t increase taxes on hardworking, middle-class Americans.”
Article originally published by the American Farm Bureau® Federation.