Former Democratic Sen. Heidi Heitkamp Now Pushes Tax Breaks For Rich F*ckwads
In a reminder that you Just Never Know, Heidi Heitkamp, who used to advocate for tax fairness when she was a Democratic US senator from North Dakota, has done a complete turn-around on an obscene tax giveaway to the very rich, and has gone from arguing against it to now heading a dark money lobbying group set up to preserve it. And as The American Prospect's Alexander Sammon reports, that reversal occurred with astonishing speed; he notes that just six months ago, Heitkamp argued on TV for eliminating the loophole, which is known as "step-up in basis."
What the hell is that? It's One Neat Trick in the tax code that allows the very rich to leave vast wealth to their heirs without paying a penny in inheritance tax or capital gains taxes. It's one of the more obscure and insanely unfair parts of the Class War by the very rich on the rest of us, by avoiding taxes that should be going to promote the general welfare.
Like many parts of the tax code, it might turn out to be hard to eliminate, both because it's beloved by the very rich, and because people's eyes might glaze over because it has a weird technical sounding name, and takes at least a brief paragraph to explain.
We'll explain it in a moment, but for now, the point is that it's a bit of tax prep magic that makes rich families richer by allowing them to dodge taxes. That's the important part. Joe Biden wants to mostly get rid of it as part of his economic plan, and now Heitkamp is lobbying against it and trying to convince other "moderate" Democrats it needs to be preserved. We need to make noise to stop that from happening, since getting rid of the step-up loophole is key to paying for the Build Back Better budget plan.
OK, now take a sip of coffee and keep your eyes open for this explanation from Bloomberg News in May, when Biden was getting rolling on getting rid of the loophole:
The step-up rule allows investors to pass on assets to heirs virtually tax-free, raising the taxable value of a property to its fair market value at the time it is inherited. A beneficiary who inherits a house worth $1 million purchased for $100,000 two decades earlier would have no capital gains. If she later sells for $1.5 million, she only pays tax on $500,000. The rule also applies to Amazon shares, which have risen more than 200,000% since a 1997 public offering, as well as other appreciated assets.
This is a big fucking sweet deal for the very rich, who don't tend to leave cash to their heirs, but instead leave vast assloads of investment assets behind. The "step-up in basis" wipes out the increase in value of those assets, meaning that instead of paying taxes on the accumulated value of that Amazon stock between 1994 and his eventual death, Bezos's heirs could sell it off as if they'd simply bought $180 billion in Amazon stock the day before, with virtually no capital gains apart from a day's interest gain.
As Sammon notes, ending this racket is very popular, not just on the left but with moderates like Joe Biden and Larry for Chrissakes Summers. And weirdly, he notes that "Heitkamp herself might have made the most robust case for ending step-up in basis in an appearance on ABC barely six months ago." On ABC's "This Week" in April, Heitkamp replied to some disingenuous bullshit from Chris Christie by saying that inheriting assets without any capital gains
is one of the biggest scams in the history of forever on income redistribution. If you have a tax—if you have a stock, you can pass it on to your kids with stepped-up basis, and it's never taxed. You know that there needs to be reform on unearned income.
And so to demonize it and say it's going to hurt the little guy, yes, that just is not factual, Chris. And you know it.
She was absolutely right, Sammon says, noting that since capital gains are eliminated at death on stocks, properties, and other inherited assets, heirs make a killing, paying no tax at all on appreciation that also hadn't been taxed before their benefactor died, either, because capital gains are only paid when you sell an asset.
It all adds up to one of the largest tax breaks in the entire federal tax code, with the Joint Committee on Taxation estimating that it will be worth $41.9 billion in 2021 alone. That, combined with the Trump tax law raising the ceiling on tax-free estates to over $11 million per person, allows dynastic wealth to travel virtually unimpeded.
Bizarrely, having so plainly made the case that it's a scam, Heitkamp now heads a nonprofit called "Save America's Family Enterprises" (SAFE), which has as much to do with small family businesses as George W. Bush's pro-logging "healthy forests initiative" had to do with preserving wilderness.
SAFE is lobbying to preserve the step-up loophole for the very rich. And damned if Heitkamp isn't now using the very same misleading claims to defend it that Heitkamp objected to when they came from Chris Christie's piehole.
"I think it's wrong as a matter of economics, looking at middle-class families, but I also think that for the Democratic Party, this is a path that should not be walked politically," she told The Hill. [...]
Of course, step-up in basis is hardly a middle-class concern. Thanks to stepped-up basis, 55 percent of the wealth in estates worth more than $100 million has never been, and will never be, subject to any income taxes at all. Opponents like Heitkamp cherry-pick lurid tales about inherited businesses, farms, and vacation homes that must be liquidated. But the Biden proposal exempts the first $1 million in capital gains, and defers taxes on farms and businesses as long as they remain in the family. Heitkamp's scare stories are completely unfounded.
Up to now, ending the loophole has been a central part of the Democrats' budget plan, but thanks to lobbying from Heitkamp and other business interests, that reform may end up being weakened or removed altogether, even though it's a White House priority.
What that means, beloveds, is that we need to make noise to our electeds and let them know we want the step-up in basis loophole to be slashed as Joe Biden originally intended, even if you have to write that down before you call your senators' and representative's office (which you should anyway if you're at all prone to phone nerves).
Don't let Heitkamp and whoever her group's undisclosed donors are get away with this shit. It's slimy and bad.
[American Prospect / Bloomberg News]
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