The House Democrat who oversees tax policy said on Tuesday that President Joe Biden’s plan to dramatically increase taxes on inherited assets lacks sufficient support in the lower room, reducing the chances of it being included in a $3.5 trillion economic package.
“There were enough questions about it,” House Ways and Means Speaker Richard Neil told reporters after the third day of committee hearings to move forward parts of the Democrats’ economic and social spending proposals. “The issue here is very simple and the calculations here are very challenging. This amounts to 218 votes,” referring to the number that reaches the majority in the House of Representatives.
Neil, a Massachusetts Democrat, plans to end the panel’s discussion of tax policies and other provisions in its remit Wednesday.
Biden’s proposal to end the inheritance tax credit known as the “increment basis,” which eliminates a capital gains tax on assets upon the death of the owner, was already running into hurdles even before a House committee left the item out of the tax bill. The legislation was passed on Monday.
The plan was central to Biden’s efforts to reform capital gains tax as part of a broader effort among progressives to balance the treatment of business income with investment income, achieving a higher capital gains rate of 39.6% before imposing an additional tax on higher earners.
Instead, the House committee has proposed raising the long-term capital gains rate to 25% from 20%. The House Democratic leadership can still introduce changes after the committee passes its draft and before the entire House votes on the legislation. However, Neal’s exclusion of this measure from his committee’s proposal, along with his recent remarks, suggests that a last-minute addition of capital gains reform is highly unlikely.
“I’ve heard from a lot of voters about the implementation plan,” Virginia Representative Don Baer, a Democrat on the committee, told reporters during a brief respite from discussing the bill.
While Senate Finance Committee Chairman Ron Wyden has hinted at addressing the raising issue, such a gesture faces opposition from moderate Senate Democrats. Farm state lawmakers have been particularly concerned about eliminating tax-exempt transfers of inherited assets, although Biden specifically identified family farms as an exception.
Democrats cannot lose any votes in the evenly divided Senate. House Democrats are unlikely to vote on a measure they know could be stripped by the other chamber and could later prove politically harmful.
“It’s not about organizing tax seminars and telling everyone what you’re up for, it’s about getting to 218,” Neil said.
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