Tax Treatment of Capital Gains at Death

I was in DC on a boondoggle maybe 15 years ago and had a meeting with an old-time staffer (and lawyer) for the Senate Finance Committee. Attached to the Democrat side of the SFC for what it’s worth.

He had been on the tax policy scene long enough to see the pre-1976 carryover basis days and the post-1976 step-up basis days.

He was adamant that a return to carry-over basis would be a shitshow for IRS administrative purposes and fervently argued for the current step-up at death law.

This is a Chesterton’s Fence situation.

The collective “we” seem to forget that many of these ideas have been tried before. This “soak the rich” idea (look at the CRS report and see the reference to an exemption for the little guy so we can tax the billionaire) is one such idea.

The other idea — floated by our current president — is to crank up the capital gains tax rate. This one has been tried (and reversed) before. It would be instructive to find out what those politicians Back In The Day were thinking when the capital gains tax rate went up and why it went down again.

A little bit of humility and history might save some optional wounds.