U.S. Rep. Bob Latta (R-OH) on Jan. 12 led seven Republicans in introducing legislation to permanently eliminate the federal Estate Tax, what’s also known as the death tax because it’s a tax on a person’s right to transfer property at his or her death.
“For years, the death tax has placed an unfair and overwhelming burden on small business owners, farmers, and ranchers, who inherit businesses from their family members,” Rep. Latta said. “Repealing the federal Estate Tax will bring a much-needed monetary reprieve to hardworking families across our country, which is why I’m pleased to lead this effort in Congress.”
The Permanently Repeal the Estate Tax Act, H.R. 338, which Rep. Latta sponsored with original cosponsors including U.S. Reps. Bill Johnson (R-OH), Ann Wagner (R-MO), and Tom Cole (R-OK), would repeal Chapter 12 of the tax code (estate tax provisions) to ensure that Americans are not taxed on the increased value of an estate by retaining the stepped-up basis at death, according to a bill summary provided by Rep. Latta’s staff.
According to Investopedia, the stepped-up basis is what happens when the price of an inherited asset on the date of the decedent’s death is above its original purchase price. The tax code allows for the raising of the cost basis to the higher price, minimizing the capital gains taxes owed if the asset is sold later.
The provision applies to financial assets like stocks, bonds, and mutual funds, as well as real estate and other tangible property, Investopedia says, noting that if the price of an asset declined from that paid by the owner’s date of death, the asset’s cost basis would step down instead of stepping up for heirs.
“Securing the economic prosperity for future generations of Americans is a worthy goal and releasing them from this burdensome and unnecessary tax is a good first step,” said the congressman.
H.R. 338 has been referred to the U.S. House Ways and Means Committee for consideration.