Recently, all 50 Senate Republicans sent a letter urging President Biden not to repeal stepped-up in basis, raising taxes on family-owned businesses. If step-up in basis is repealed, family-owned businesses would suffer much higher tax liabilities, hurting the businesses themselves and those they employ.

The letter was signed by Senate Minority Leader Mitch McConnell (R-Ky.), Senate Minority Whip John Thune (R-S.Dak.), Senator Finance Committee Ranking Member Mike Crapo (R-Idaho) and Senators John Boozman (R-Ariz.), Chuck Grassley (R-Iowa) and Steve Daines (R-Mont.). Biden proposed removing the stepped-up in basis provision in his budget along with trillions of dollars of other tax increases.

Stepped-up in basis is a provision that allows decedents to pass down their family businesses by protecting it against double taxation. This is done by “stepping up” the purchase price of the asset to the current market value. Repealing stepped-up in basis means that the unrealized gains passed down to the heirs of a family business would be taxed. This tax would be separate from, and in addition to, the existing 40 percent death tax.

Not only would this be a tax increase, but it would also increase tax complexity. If a taxpayer is unable to determine how much they bought the asset for, they may need to pay the 43.4 percent capital gains tax on the entire value of that asset, many of which could have been bought decades ago.

The letter outlines the many problems with President Biden’s proposal to remove stepped-up in basis, including job-loss and increased tax liability. 

A study by E&Y that found by removing stepped-up in basis, the federal government would eliminate 80,000 jobs each year over the next decade. 

Another study from Texas A&M Agricultural and Food Policy Center found that 98 percent of the farms in its 30-state database would be impacted with a median increase in tax liabilities of $726,104 per farm. 

Many asset-rich, cash-poor businesses would have to liquidate their assets or lose their entire business if the Biden Administration imposes this second death tax. In a Ways and Means Committee Hearing, multiple American business owners explained how removing stepped-up in basis would harm their businesses and force their heirs to pay a tax that would force them to liquidate their assets.

Senate Republicans should be applauded for standing up for family-owned business and standing against the massive tax increases that Biden is proposing.