The Biden capital gains tax plan would raise $ 113 billion if step-in-base is killed, Wharton says

Proposal for the taxation of investment income

They can do this by holding stocks and other assets until death. At that point, assets are transferred from an estate essentially tax-free: heirs receive the asset at its current market value (which eliminates the profit on paper), and the estate pays no tax on the unrealized gain.

(Wealthy goods may still owe state or federal estate tax on the asset.)

The increase in taxes on capital gains means that individuals making more than $ 1 million a year may choose to hold investments longer – and bequeath them to heirs tax-free – to avoid taxes.

This is one of the reasons Wharton predicts a loss of $ 33 billion from a higher capital gains tax system if not tied to an end to the top-up.

“Reforms like the elimination of a reinforced base … would limit these avoidance options and thus increase revenue per percentage point of capital gains tax,” said the analysis published on Friday.

Around 0.3% of taxpayers (roughly 540,000 people) reported incomes over $ 1 million in 2018, which means they would be subject to the expected tax hike according to the latest IRS data.

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