HOW IT WORKS

1. WHAT DOES BIDEN WANT TO DO

He proposes to repeal a currently allowed tax adjustment known as step up in basis. Currently, when people die with stocks, real estate and other assets that grew in value during their lifetimes, heirs who inherit those assets don’t have to pay capital gains tax on any of the appreciation that occurred under the previous owner

2. WHAT WOULD REPEALING STEP UP IN BASIS MEAN

It would mean that heirs would have to pay tax on unrealised gains passed on by the prior owner at death on all sorts of assets, which would amount to a massive increase in their liability

3. WHY REPEAL IT

The Biden administration say it primarily benefits wealthy households. Lily Batchelder, Biden’s nominee for the top tax job at the Treasury Department, and David Kamin, deputy director of the White House’s National Economic Council, published a paper in 2019 that said nearly 40% of the wealth of the top 1% comes from accrued and unrealized capital gains, citing data from the Federal Reserve Board

4. WHO SUPPORTS THE CHANGE

Democratic senators introduced a proposal in March to eliminate the step up in basis with a $1 million exemption, similar to the Biden plan. The senators said the exemption was needed to protect small family farms and businesses -- a nod to arguments often raised by opponents of taxes on estates and inheritances. Biden’s plan adds to this by proposing family-owned businesses and farms wouldn’t have to pay taxes when given to heirs who continue to run the business