American Families to Joe Biden: We’re Disgusted with Your ‘Twisted’ ‘Death Tax’

You heard it over and over from the administration: Corporate tax. The one percent. Corporate tax. The one percent. Then, almost under their breath, spoken like the fine print in a radio ad: Oh yeah, and capital gains tax will go up, too.

That’s still generally a popular thing with voters, though. It conjures up images of consternated, well-coiffed men in front of a computer in a mahogany-soaked home office, sipping a single-malt scotch and grumbling about how they’d have to pick one of the less-desirable towns in the Hamptons to dock their yacht in next summer.

And that’s what the administration wants you to think — even though, to them, you or your children may very well be that man. You see, while the administration was speaking in the radio-ad voice, it was also saying the estate tax  — the so-called “death tax” — would be subject to capital gains tax rules. For a lot of families making well under $400,000, their children are going to take one heck of a hit.

Currently, the estate tax only inheritances on property worth over $11.7 million for single taxpayers, $23.4 million for couples. Anything over that you pay taxes on. If you’re a single individual who inherits a $15.7 million estate, for instance, you’d pay taxes on $4 million.

The White House called this a “loophole that allows the wealthiest Americans to entirely escape tax on their wealth by passing it down to heirs.” In Biden’s American Families Plan — the last in his trilogy of trillion-dollar programs, the one designed to give Americans two years of government-paid college and 12 weeks of paid family and medical leave — he closes it. And how.

“The President’s plan will close this loophole, ending the practice of ‘stepping-up’ the basis for gains in excess of $1 million ($2.5 million per couple when combined with existing real estate exemptions) and making sure the gains are taxed if the property is not donated to charity,” the White House’s fact sheet on the American Families Plan read. “Without these changes, billions in capital income would continue to escape taxation entirely.”

Not only that, it would subject these estates to capital gains tax rates, which will be raised to 40.8 percent from 23.8 percent, according to The Wall Street Journal. This tax would be on unrealized gains, too — potential profits that exist on paper but haven’t been converted into actual wealth. This is the first time unrealized gains have been included in the estate tax.

In a Sunday article, The Journal’s Hank Adler and Madison Spach laid out just who this would hurt and how it would hurt them.

“To understand how uneven the burden of this tax is, consider a hypothetical taxpayer for whom it would be especially heavy: a woman who, as a young widow decades ago, bought a home in New York City for $250,000, reared her children there, and never remarried,” they wrote.

“The property is now worth $2.5 million and is her only asset. If she dies after the Biden plan becomes law, the estate itself wouldn’t be taxable, but it would be subject to the new death tax on $1 million of the unrealized gain from the home (the $2.25 million appreciation less the $1.25 million in exemptions). Her grown children would inherit $408,000 less than under current law. The Biden tax would be based on the value of the asset, not the equity, so the estate would be liable for the full amount regardless of any mortgage outstanding.”

Several families the U.K. Daily Mail talked to were quickly learning what the downsides of the new plan were, with one going so far as to call it “twisted.” While these families may be wealthier than average, they’re also not the Jeff Bezoses or Steve Jobses of the world. These are far from the “wealthiest Americans.”

Tom Hedger, 58, runs a family business that was started by his father. It was passed down to him in 2010, a year where the death tax was suspended. In 2019, they bought an $800,000 house in Maine — but, because the pandemic raised the value on real estate away from major cities, the value shot up. They also have Airbnb properties that will serve as their retirement business.

Now, they worry their children won’t be able to pay the bill when they die, either on the properties or the family business. Hedger said that if it hadn’t been suspended in the year the business was passed down, they “didn’t have the cash on hand to pay the estate tax. You basically would have been had to liquidate a huge amount of that.”

“It is insane — the concept that people are just sitting around with that amount of cash and the idea that somehow that money is more beneficial in the hands of the government,” Hedger said.

“My brothers are stressing our tremendously, they’d hoped to pass the business on too to the third generation. Now it’s like, what do you have to liquidate in order to be able to afford to pass it on to your family? It’s a question of can you afford your own family’s money?”