Comment by mattmaroon
2 days ago
Well, no. They have several ways of avoiding the eventual capital gains actually, and that is a legit problem changes to the tax code could fix.
Stepped up basis is one good Google search to explain one way.
2 days ago
Well, no. They have several ways of avoiding the eventual capital gains actually, and that is a legit problem changes to the tax code could fix.
Stepped up basis is one good Google search to explain one way.
Stepped-up basis is weird, I agree. I don't see any good reason for it to stay, other than reducing overall tax burden. On the other hand, I don't see any good reason to be strongly against it, either, other than believing in progressive taxation as a public good. After all, it's not like stepped-up basis only applies to the ultra-rich; it applies just the same to someone who leaves behind a $500k stock portfolio or a dilapidated house worth $75k.
Having said that, upon, say, Elon Musk's passing, his estate would still owe billions of dollars in tax.
Stepped up basis just makes no sense at all. If I get $500,000 in capital gains and realize them, I pay capital gains taxes on them. If, however, I give them to my children when I die, no taxes are paid.
It would be entirely reasonable to put a cap in there if we are concerned about it hurting the middle class and wanted to just be a tax benefit.
The whole idea is that capital gains taxes are lower than income taxes because it comes from something that was already taxed, but that isn’t even true a lot of the time either. As Warren Buffett always says his overall tax bill is still lower than his secretary’s.
It’s not even just the idea that progressive taxes are better, it’s that this is a regressive tax system. One more accurately, and uneven one because two people who make the same money could end up paying very different tax bills throughout their life.