[Congressional Record Volume 167, Number 132 (Wednesday, July 28, 2021)]
[Senate]
[Pages S5118-S5119]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]



                              The Economy

  Mr. THUNE. Mr. President, not content with their $1.9 trillion so-
called COVID relief bill--paid for entirely with money borrowed from 
younger generations of Americans and our children and grandchildren--
Democrats are readying another partisan spending spree.
  Democrats are preparing to consider a $3.5 trillion tax-and-spending 
package, this one at least partially paid for by massive tax hikes--tax 
hikes on small businesses, tax hikes on large businesses, tax hikes on 
investment, tax hikes on well-off Americans, and tax hikes on the 
middle class. That is right, tax hikes on the middle class.
  Now, President Biden is fond of repeating that he won't raise taxes 
on anyone making under $400,000 a year, but the new death tax he is 
proposing will definitely hit some middle-class Americans. Let's talk 
about that new tax.
  President Biden and congressional Democrats are proposing to 
eliminate a part of the Tax Code known as ``step-up in basis'' or 
referred to often as ``stepped-up basis.'' Under our current Tax Code, 
when you inherit something from an estate, whether that is stocks or a 
house, the value of that item is stepped up from its original value to 
its current market value when you receive it. This prevents you from 
having to pay capital gains taxes on the amount that your parents' 
house increased in value when it was owned by your parents.
  Let's say you inherit a house that your parents bought for $100,000, 
but it is now worth $500,000. Under current law, when you inherit that 
house, you are not liable for taxes on the increase in value from the 
time your parents bought it. The house is transferred to you at its 
current market value of $500,000. So if you sell the house right when 
you inherit it, you will receive the full value of the house instead of 
having to pay taxes on the amount that the house increased in value 
while your parents owned it. If you sell that house 2 years later for 
$650,000, you are only required to pay taxes on the $150,000 in value 
it gained while it was in your possession.
  Under the Democrats' proposal, however, capital gains taxes would 
automatically be triggered upon death if the increase in value of an 
individual's estate has exceeded a certain amount. So, if your parents' 
house or the family farm or other assets have increased in value more 
than Democrats deem desirable, you would now owe capital gains taxes on 
the amount of that increase immediately after your parents' death minus 
the amount Democrats choose to exempt.
  There are plenty of middle-class Americans around this country who 
would be paying this tax. You wouldn't be protected just because you 
make under $400,000 a year.
  Now, the President has tried to get around this by arguing that 
Democrats would be taxing dead individuals, not living ones. So if your 
parents die and pass on their estate, the argument suggests the tax 
that you have to send to the Federal Government isn't a tax on you but 
on your parents. Well, who does he think he is fooling? Who is going to 
experience the loss of that money--you or your parents? Who is going to 
be writing the check to the Federal Government? You will.
  Let's imagine that a woman's parents die and leave her their estate, 
and 2 weeks later, a thief comes in and steals part of that 
inheritance. Who are people going to think was robbed--the daughter or 
her deceased parents? I think all of us would recognize that it was the 
daughter who was robbed. The same thing applies to Democrats' proposed 
new death tax. It is not dead Americans who would be writing checks to 
the Federal Government. Sure, the tax is owed by the decedent or 
transferor, but for all practical purposes, the costs would be borne by 
their descendants.
  The truth is, even if we accept the argument that Democrats' new 
death tax is a tax on deceased Americans and not their descendants, 
this tax would still hit some middle-class Americans. After all, it is 
perfectly possible to work hard your whole life and invest wisely and 
see your estate appreciate in value by more than $1.25 million--the 
proposed individual exemption level--over the course of your life 
without ever exiting the middle class. We are not talking about 
confining this taxation to individuals with a yearly income of $1.25 
million; we are talking about the increase in value on an estate over a 
person's lifetime. There is no question that this tax would fall on the 
estates of some thoroughly middle-class Americans.
  The problems with this new death tax aren't limited to the fact that 
it breaks President Biden's pledge not to raise taxes on individuals 
making under $400,000 a year. There are a lot of additional problems, 
starting with the administration and compliance costs of this tax.
  Congress actually passed a similar proposal in the 1970s but repealed 
it before it went into effect because it was so complicated and 
unworkable. That is right. Congress repealed the proposal before it 
was even implemented because it was clear that collecting this tax was 
going to be too complicated.

  Forty-odd years later, collecting this tax would still be an 
enormously complicated matter. It would put incredible new 
recordkeeping requirements on a lot of American families, and it would 
strain the capabilities of the IRS, although those 87,000 new IRS 
employees President Biden wants to add to the Agency would certainly 
increase the available manpower to levy new tax hikes.
  Plus, I can only imagine the litigation that would arise over the 
valuation of assets. What happens if the IRS disagrees with the 
estimate of the value of your family farm or business? Do you have to 
take the IRS to court? Will the IRS take you to court?
  In addition, there is a very real danger that Americans would be 
paying taxes on nonexistent gains, in part due to inflation and the 
natural expansion of the economy. Recent economic reports are raising 
concerns that, with the administration's robust new entitlement 
spending, Americans could be shouldering the burdens of significant 
inflation now and long into the future. But Democrats' new death tax 
would not account for inflation on an asset, like a family-owned farm 
or business, which means Americans could be paying a lot of money in 
taxes on nonexistent gains.
  Finally, I want to talk about the threat this tax poses to family 
farms and businesses.
  Now, Democrats claim that they will defer this tax for family farms 
and businesses as long as a member of the family inherits and then runs 
the farm or business, but it is completely unclear what this will look 
like in practice. Will ``family members'' refer only to sons and 
daughters? What if a stepson wants to take over the farm, or a niece? 
Will the inheritors still be subject to the tax then, which could 
result in their having to sell that farm the niece wants to run? What 
happens if two or more of the children want to run the farm? There are 
a lot of unanswered questions.
  Of course, it is important to remember that Democrats will only be 
deferring the tax. So if the time ever comes when the family wants to 
sell the farm--maybe it is getting hard to run and a neighboring family 
is willing to buy it--the family would have to pay those taxes that 
were deferred when their mom or dad died. If that family farm has been 
handed down through a few generations already, it is completely 
possible that paying those taxes would consume a big part of that 
legacy.
  There is a reason 13 House Democrats sent a letter to House 
Democratic leaders expressing their concern about the proposed step-up 
in basis repeal. It is because this tax would pose a real threat to the 
continued existence of family farms and businesses. It is the same 
reason that those in agriculture and small business communities oppose 
this new death tax.

[[Page S5119]]

  I was proud to lead all 50 Senate Republicans in a letter last week, 
urging President Biden to drop this misguided proposal, and I will 
continue to do everything I can to protect family farms and businesses 
from this new tax.
  There should be a limit on how many times the Federal Government can 
tax you. Americans' bank accounts should not be regarded as a 
bottomless barrel of money to pay for Democrats' preferred government 
programs, because that is exactly what is happening here. Democrats 
want to massively and permanently expand government, and they are 
looking to Americans and American businesses to pay for their social 
experiments. They apparently haven't spent much time considering how 
our economy or American families would suffer as a result of their tax-
and-spending spree.
  Middle-class Americans should not have to see their inheritances 
shrink to pay for Democrats' spending, and family farms and businesses 
that already face challenges from our current death tax should not have 
to be worrying that a new death tax will spell the end of their hard-
earned legacies.
  I hope the Democrats will think twice before moving forward with this 
new tax increase on Americans.
  I yield the floor.
  The ACTING PRESIDENT pro tempore. The Senator from Washington.
  Mrs. MURRAY. Mr. President, I ask unanimous consent to complete my 
remarks before the vote starts.
  The ACTING PRESIDENT pro tempore. Without objection, it is so 
ordered.