A group that was set up to fight a prior Biden administration-backed tax increase on generational wealth transfers is launching a new campaign raising concerns about Democrats’ proposals to tax the richest households based on the value of unsold assets like stock, homes and art.
The organization, Saving America’s Family Enterprises Inc., is bringing in former Louisiana Sen. John Breaux, a centrist Democrat who served on the Finance Committee, to serve as a senior adviser and spokesperson and is running ads in 10 states and Washington, D.C.
The group says it has already spent $1 million on the ad campaign and will continue buying air time as the year goes on. The states they’re targeting include key swing states and primary stops in the 2024 presidential election and states expected to see contentious Senate battles next year.
It’s a new push from “SAFE,” which launched in 2021 with former Sen. Heidi Heitkamp, D-N.D., as the voice of a campaign against the Biden administration’s proposal to tax the appreciation in value of unsold assets over $1 million at the time they’re inherited.
In subsequent budget requests, the Biden Treasury Department pitched a higher $5 million per-person exclusion from the tax. But the proposals never got off the ground with Democrats in control of Congress, where centrist members feared the impact on family-run farms and small businesses.
SAFE is a nonprofit organized as a 501(c)(4) “social welfare” group that says it’s focused on education and doesn’t have to disclose its donors. A SAFE representative declined to provide more information.
Ads against taxing “unrealized gains” have run in Michigan, Montana, Nevada, Pennsylvania, Ohio and West Virginia, all states with Senate elections that Inside Elections with Nathan L. Gonzales considers battlegrounds that Democrats are defending in 2024. They’re also running in Arizona, where Sen. Kyrsten Sinema, a former Democrat who recently became an independent, is up for reelection in 2024.
Many of these states and the remaining ad targets — New Hampshire, Iowa and South Carolina — are also likely to be frequent campaign stops in the 2024 presidential election.
The ads claim that taxing any rise in value of unsold assets would hit the middle class and that the rich will find loopholes. So far, Democrats’ proposals have only applied to the richest households with wealth or income over $100 million.
The White House’s latest budget proposal would create a 25 percent minimum tax that phases in above $100 million in net worth, or what’s left once liabilities are subtracted from assets. The tax would be applied to both regular income and any gain in the value of unsold assets.
[White House blueprint would raise taxes, boost spending]
The value of tradable assets like shares of public company stock would be based on year-end market prices, while nontradable or illiquid assets like real estate, art or collectibles would be valued initially based on the last time it was assessed. For each subsequent year, Treasury would assume a conservative annual appreciation in value, based on the five-year Treasury note rate plus 2 percentage points.
Households could in some cases pay the tax over time, and it would be credited against future capital gains tax if assets are eventually sold.
Senate Finance Chair Ron Wyden, D-Ore., has his own proposal applying to individuals with $1 billion or more in assets or three years straight of $100 million in annual income.
It would also consider the end-of-year market price for tradable assets like stock but apply the top long-term capital gains tax rate, currently 23.8 percent, to any rise in value. Other assets would face an extra charge when they’re sold in an attempt to even out the lack of tax each year, avoiding the need to value those holdings regularly.
‘Bad policy’
Breaux said in an interview that he supports the goal of making sure all taxpayers pay their fair share. But he said other options make more sense than taxing gains that exist merely on paper, pointing to billions of dollars that could be collected from the richest households with better enforcement of the existing tax code.
“When you just have a concept — let’s tax wealthy people — a lot of people say sure, fine,” Breaux, now a principal at lobbying firm Crossroads Strategies, said. “But it’s important to know that taxing unrealized gains is bad policy. If you want to raise money, there’s a lot of ways to do it but you don’t want to do something that is bad policy.”
He said the taxes would be charged on income that people haven’t yet received and require guesswork to value many of the assets that would fall under the new rules. Breaux added it would add complexity to the tax code and be difficult to enforce.
Breaux said the new campaign aims to educate people on the proposal, going beyond names Democrats have given the tax — like the White House’s “billionaire minimum tax” — that could sound appealing. “We can’t let slogans rule the day,” he said.
The Biden administration argues in the fiscal 2024 “greenbook” of tax proposals that allowing investments and assets to accrue value for years without facing taxation benefits wealthier households and makes the tax code uneven.
Supporters say the proposals to tax unsold assets fit within a set of measures from the White House that respond to wealthy households accruing assets and passing them down to heirs, possibly without having to pay federal taxes for decades if at all.
Jean Ross, a senior fellow focused on tax and fiscal policy issues at the Center for American Progress, said in an interview that wealth like stock holdings and real estate can be used as collateral for loans, so it functions like income for rich taxpayers and influences their economic decisions.
“People understand that every dollar they earn in wages and salaries is taxed and that people who have this tremendous wealth … they’re able to borrow against their holdings, make use of it in other ways — that they are doing well,” Ross said.
She said that any concerns with both the White House and Wyden’s proposals could be addressed in the legislative and regulatory processes. Ross added she believes the time to advance the proposals will be the coming debate around pieces of Republicans’ 2017 tax law that expire after 2025, which includes a lower top individual income tax rate.
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