Friday, September 17, 2021
Washington Post op-ed: Congress Is Passing Up a Chance to Close a Tax Loophole — and the Racial Wealth Gap, by Dorothy Brown (Emory; Visiting at Georgetown):
The ‘step-up in basis’ rule benefits a small, mostly White, group of Americans.
The United States has a huge racial wealth gap: The median wealth of White families is almost eight times that of Black families and five times that of Hispanic families. One of the hidden drivers of this gap is tax policy, which has accelerated wealth-building by White families, while excluding most Black families. Congress recently had an opportunity to reform at least one lever of that inequality — only to reject it.
Earlier this year, as part of the American Families Plan, the Biden administration proposed closing a nearly century-old loophole called “step-up in basis,” saying it is “exacerbating inequality.” While many can take advantage of that rule, those who benefit the most are in the top 1 percent of income earners (earning more than $1 million of income). That group is disproportionately White: While 15 percent of White Americans are millionaires, only 2 percent of Black Americans are millionaires. A complete repeal of the stepped-up basis rule would raise an estimated $505 billion over 10 years. This week, though, the House Ways and Means Committee released its tax package, which drops that proposed reform. ...
There is no good reason to have one rule for gifts, which preserves the government’s ability to tax the gain upon later sale, and a different rule for inheritances, which eliminates it. The “stepped-up” rule only encourages those in the know to hoard property until death. ...
As I demonstrate in my book, “The Whiteness of Wealth,” the U.S. government has historically designed policies around White Americans’ experiences of homeownership, marriage, and paying for college — typically to the detriment of the majority of Black Americans who are ineligible for those same subsidies. This week, as Congress declined to close the stepped-up basis loophole, we got to see that play out in real time.