According to the latest analysis and calculations by accountants, wealthy families could face a combined tax rate of up to 61 percent on their inherited wealth under President Joe Biden’s proposed tax increase plan, financial news website CNBC reported.
According to an analysis by the Tax Foundation, a tax policy research organization, Biden’s newly proposed “American Family Plan” would nearly double the capital gains tax and eliminate the tax credit for asset appreciation, and if the estate tax is included, the overall effective tax rate would be 61%, the highest tax rate in the United States in nearly a century. The overall effective tax rate would be 61%, setting a new record for the highest tax rate in the United States in the last century.
That’s a lot of money,” said Brad Sprong, partner and head of private corporate tax at KPMG. That’s why we tell our clients they have to be smart and start preparing now.”
It’s unclear whether Biden’s tax reform plan will pass the U.S. Congress, and it’s hard to say for sure whether it can successfully break through even with the changes. Many Democratic members of Congress tend to oppose raising the capital gains rate to 39.6 percent and do not favor repealing the system of calculating the asset appreciation preference, commonly known as “step-up basis. Under the current “step-up basis” system, the value of an asset is adjusted to its present value, rather than its initial value, so that the amount of “appreciation” on an asset will be greatly reduced, and the corresponding tax paid will be greatly reduced.
It is understood that only a very small number of wealthy people at the top of the pyramid will be taxed at up to 61%. Many wealthy people will avoid paying high taxes through tax arrangements and estate distribution planning.
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