President Obama will call for a higher tax rate on capital gains during the State of the Union speech, according to the White House. It rolled out tax-reform proposals over the weekend. They include plans to “increase the total capital gains and dividends rates for high-income households to 28 percent” and to “close the stepped-up basis” on assets that pass to heirs upon the owner’s death. Stepped-up basis means the value of the property at the time of the transfer to the heir rather than its value when it was acquired, sometimes decades earlier at a much lower value.
There was no immediate word on how the proposal might affect agriculture, which has seen land values skyrocket since 2006. Many farmers use trusts as part of their estate planning to ease the transfer of land to a younger generation. The White House said its plan would “almost exclusively impact the top 1 percent” of Americans and there would be protections for the middle class, including a $200,000 deduction for capital gains, a $500,000 exemption for sale of a home, no taxation of small, family-owned and operated businesses until the business was sold, and the option for a closely held business to pay capital gains taxes over 15 years.
The Republican-controlled Congress was likely to be skeptical of tax proposals from a Democratic president. But Republican leaders have said tax reform is a goal.
A White House fact sheet on the president’s proposals for tax reform is available here.
The White House suggests WhiteHouse.gov/SOTU “is the place” to watch the State of the Union speech. “Stream the address and follow along with exclusive interactive graphics and charts showing what the announcements mean for you,” it says.