Taxing Capital Gains At Death Would Harm Small Businesses, U.S. Economy
U.S. lawmakers have floated a number of proposals to increase death and estate taxes. One proposal would tax gains at death while another would replace step-up in basis with carryover of the decedent’s basis. A new EY report has concluded provisions like these would damage U.S. gross domestic product (GDP) and would significantly decrease job creation.
The study was conducted for the Family Business Estate Tax Coalition, which MSCI is a member of.
The EY study found middle-class, family-owned businesses would be particularly hard hit by the proposed policies. Currently, when someone inherits assets, they are not taxed on the appreciation that happened before they inherited the assets. If a family-owned small business, or manufacturer is forced to pay capital gains accrued by the prior owner, they would likely face large tax bills that puts the future of their business at risk.
According to EY, repealing the step-up in basis would result in:
- 80,000 fewer jobs in each of the first ten years;
- 100,000 fewer jobs each year thereafter;
- A $32 reduction in workers’ wages for every $100 raised by taxing capital gains at death; and
- A $10 billion annual reduction in GDP.