Biden's proposed inheritance tax changes would destroy small American farmers: Norquist
America's small family farms could be destroyed if Congress passes Biden's proposed tax change plan, said Grover Norquist, President and Founder of Americans for Tax Reform. Tucked away in Biden's American Families Plan is the elimination of a step-up in basis tax benefit on appreciated assets like farms.
"There's the normal inheritance tax that the Democrats want to push higher as well as wanting to end the step-up in basis, which was put in a hundred years ago to protect family farms from being crushed every generation," Norquist said. "The Democrats actually took that protection away in 1976, but put it back in 1980 because it was unworkable. Biden saw eliminating the step-up in basis fail, and he decided to get rid of it again. It's a very bad decision."
Norquist spoke to Michelle Makori, editor-in-Chief of Kitco News, at FreedomFest 2021 in Rapid City, South Dakota.
Under the current tax law, a farm or business passes through the family without a capital gains tax. The value of it is "stepped-up" or adjusted to its current value, and the heirs only pay a capital gain if they later sell it at a higher valuation.
"The step-up in basis allows farms to keep moving through family businesses from generation to generation without being chopped up each time because of the death of family members. It's protected family farms, and now they want to take it away," Norquist explained.
Another way the Biden Administration is looking to help fund the American Families Plan, is to nearly double the top tax rate on capital gains from 23.8% to 43.4%.
"This would be a very high capital gains tax rate, close to where Jimmy Carter had it when things went haywire. By reference, China's capital gains tax rate is 20%, so we would have more than twice the capital gains tax rate compared to China," Norquist emphasized. "Also, there are a number of European countries that do not have any capital gains taxes. It would be very bad for the United States competitively, but that's where Biden's head is at."
"It creates a real advantage for China and other countries that have more reasonable capital gains taxes, and would tremendously disadvantage investment into the United States," Norquist added.
According to the Tax Foundation, the combined rate for the higher inheritance tax and increased capital gains tax rate would be the highest in nearly a century.
Norquist also spoke about the revival of the idea of a carbon tax, which could help pay for Biden's infrastructure plan. A carbon tax is a fee imposed on the burning of carbon-based fuels like coal, oil and gas. Policymakers use the revenue gained from a carbon tax to offset those impacts, lower taxes, reduce budget deficits, invest in clean energy and climate adaption, according to the Tax Policy Center. A carbon tax would be a form of a Value Added Tax (VAT), which is commonly used in Europe.
"It is a value-added tax on training wheels. It's preparation for putting a value added tax in the U.S. like most European countries have," Norquist explained. "It would generate so much money, that you could have a European welfare state in the U.S. with a value added tax. It is important to defeat it."
For more on Grover Norquist’s views on a carbon tax, please watch the full video above.
Follow Michelle Makori on Twitter: @Michelle Makori