The claim: Estateswill be taxed at 61% upon death under 'part 2' of infrastructure bill
As the federal infrastructureand reconciliation packages continue to be debated in Congress, some on social media claim the big price tag will be paid by sneaky taxes.
“How Many Citizens Are Actually Aware Under Part 2 Of The Infrastructure Bill, Upon Death The Entire Value Of Your Accumulated Wealth And Estate Will Be Taxed At 61%..?” an Oct. 11 Facebook post reads. “This Alone Confirms The Big Lie, 3.5 Tillion (sic) Will Cost Zero..! Liars..!”
The post, one of several versions of this claim,has been shared more than 700 times in three days.
But the claim gets the facts mixed up. Biden's American Families Plan includes a proposal that would close a loophole where capital gains would be taxed at death just as they are during life, but it would only affect the ultra-rich, experts say. Plus, the proposal is not included in the infrastructure bill or the reconciliation bill.
USA TODAY reached out to the Facebook users who shared the post.
Biden plan misrepresented, not included in infrastructure bill
A search of the infrastructure bill's text found no mention of a 61% tax, or any tax, on one'saccumulated wealth and estate after death.What the post is likely referring to is a proposal in Biden's American Families Plan.
"The President does have a proposal to apply the income tax to capital gains that are accrued at death, just like they're applied at life, which is currently a loophole," said Marc Goldwein, senior director of policy for the nonpartisan Committee for a Responsible Federal Budget. "For some extremely wealthy familiesthat die,that will mean an effective tax ratein that range. But that's not in the infrastructure bill at all, and it's not in any version of the reconciliation bill that's been made public at this point."
Goldwein said the current law works like this: If you buy something for $100 and sell it for $200, you pay taxes on that $100 difference. But if you hold onto it until you die and pass it to your heirs, they pay no tax on it, as they're only required to pay the amount that has been accrued since they held it. This allows accumulated gains to be passed from generation to generation untaxed.
"Current law basically lets you avoid that tax by just holding the asset forever, and that's actually a huge hole in the tax code;it creates a huge loophole because people can avoid paying capital gains," Goldwein said.
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Under Biden's plan, a one-time 40% tax on all assets that are capital gains would occur at death.
Combining Biden's proposed capital gains taxwith the existing estate tax law, which says that if you die with over $11.7million in assets that amount is taxed once at a 40% rate, somewealthy people could end up being taxed on unrealized capitalat 61% under the proposal.
"The effective rate could be as high as 61%when including the estate tax and taxing unrealized capital gains at death under President Biden’s tax plan," said Garrett Watson, senior policy analyst at Tax Foundation."However, taxpayers who have lower levels of wealth would not be subject to one or both of the estate tax and taxing unrealized capital gains at death."
Watson added that only unrealized gains of more than$1 million for singles and $2.5million for joint filers would be subject to the tax. That means the vast majority oftaxpayers would not be subject to the 61% effective tax rate.
With the estate tax kicking in at $11.7 million in assets, that means only the uber-rich could face a combined tax of 61% at death.
More:House delays infrastructure vote after President Biden makes pitch; negotiations continue
That doesn't mean the proposal couldn't find its way into law.
The tax proposals now before the House Ways & Means Committeedo not include Biden's proposal on taxing unrealized capital gains at death, which Watson saidsignals the proposal likely will not make it to the final package. The Senate Finance Committee, which has not released its own tax proposals,could include Biden's proposal later on.
Our rating: False
We rate FALSE the claim that estates will be taxed at 61% upon death under 'part 2' of the infrastructure bill.Biden's American Families Plan includes a proposal that would close a loophole where capitalgains would be taxed at death just as they are during life, but it would only affect the ultra-rich, experts say. The proposal is also not included in the infrastructure bill or the reconciliation bill.
Our fact-check sources:
- Phone interview with Marc Goldwein, Oct. 15
- Email interview with Garrett Watson, Oct. 15
- Congress.gov, retrieved Oct. 15, H.R.3684 - Infrastructure Investment and Jobs Act
- White House, April 28, FACT SHEET: The American FamiliesPlan
- Congress.gov, retrieved Oct. 15, H.R.5376 - Build Back Better Act
- Tax Foundation, April 29, Joe Biden’s 61 Percent Tax on Wealth
- Internal Revenue Service, retrieved Oct. 15, Estate Tax
- Investopedia, Sept. 7, Estate Taxes: Who Pays? And How Much?
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Our fact-check work is supported in part by a grant from Facebook.
