Biden to include stepped up basis, nutrition program in State of the Union tonight
In his State of the Union address tonight, President Biden will propose eliminating stepped-up basis valuations of assets but exempt farms and family-owned businesses “when given to heirs who continue to run those businesses,” a senior administration official said in a briefing late Tuesday night.
The phrasing looks like it could revive the debate over who should be considered an active participant in farming.
Here is the section that applies to stepped up basis from the briefing:
“And fourth, the president’s plan would address the very significant loophole in our existing tax code that allows the — the wealthiest Americans to entirely avoid income taxes on their gains by holding assets for their entire lifetime and passing it on to their heirs. This is sometimes referred to — this is technically a step-up basis. This will also enhance our ability to actually rate — raise revenue from the capital gains system.
“This reform will be designed with explicit protections so that family-owned businesses and farms will not have to pay taxes when they give — when given to heirs who continue to run those businesses.”
A White House fact sheet also says the plan will:
“End capital income tax breaks and other loopholes for the very top. The president’s tax reform will end one of the most unfair aspects of our tax system: that the tax rate the wealthy pay on capital gains and dividends is less than the tax rate that many middle-class families pay on their wages.
“Households making over $1 million — the top 0.3% of all households — will pay the same 39.6% rate on all their income, equalizing the rate paid on investment returns and wages.
“Moreover, the president would eliminate the loophole that allows the wealthiest Americans to entirely escape tax on their wealth by passing it down to heirs. Today, our tax laws allow these accumulated gains to be passed down across generations untaxed, exacerbating inequality.
“The president’s plan will close this loophole, ending the practice of ‘stepping-up’ the basis for gains in excess of $1 million ($2.5 million per couple when combined with existing real estate exemptions) and making sure the gains are taxed if the property is not donated to charity. The reform will be designed with protections so that family-owned businesses and farms will not have to pay taxes when given to heirs who continue to run the business. Without these changes, billions in capital income would continue to escape taxation entirely.”
As part of an elaborate increase in social programs called the American Families Plan, Biden will propose spending $45 billion on changes to nutrition programs.
The plan would make the summer EBT program announced for this summer permanent, expand free school meals, mostly for elementary school children, launch a healthy foods incentive demonstration and allow individuals previously incarcerated on drug charges to be eligible for the Supplemental Nutrition Assistance Program.
The White House fact sheet says:
“The pandemic has added urgency to the issue of nutrition insecurity, which disproportionately affects low-income families and families of color.
“No one should have to worry about whether they can provide nutritious food for themselves or their children. A poor diet jeopardizes a child’s ability to learn and succeed in school. Nutrition insecurity can also have long-lasting negative impact on overall health and put children at higher risk for diseases such as diabetes, heart disease, and high blood pressure.
“Today, one-fifth of American children are obese, and research shows that childhood obesity increases the likelihood of obesity in adulthood. In addition to the incredible financial burden on the health care system, diet-related diseases carry significant economic and national security implications by decreasing work productivity, increasing job absenteeism, and threatening military readiness. A recent study found that U.S. children are getting their healthiest meals at school, demonstrating that school meals are one of the federal government’s most powerful tools for delivering nutrition security to children.
“To ensure the nutritional needs of families are met, President Biden’s plan will invest $45 billion to:
▪ “Expand summer EBT to all eligible children nationwide. The Summer EBT Demonstrations helps low-income families with children eligible for free and reduced-price meals during the school year purchase food during the summer. Research shows that this program decreases food insecurity among children and has led to positive changes in nutritional outcomes.
“The American Families Plan builds on the American Rescue Plan’s support for Summer Pandemic-EBT by investing more than $25 billion to make the successful program permanent and available to all 29 million children receiving free and reduced-price meals.
▪ “Expand school meal programs. The Community Eligibility Provision allows high-poverty schools to provide meals free of charge to all of their students. It is currently available to individual schools, groups of schools within a district, or an entire district with at least 40% of students participating in the Supplemental Nutrition Assistance Program.
“The program is particularly important because some families whose children would be eligible for free meals may not apply for them due to stigma or not fully understanding the application process. In addition, other families in high-poverty schools may still be facing food insecurity but make just enough to not qualify for free school meals.
“However, only 70% of eligible schools have adopted CEP, because some schools would receive reimbursement below the free meal rate. The president’s plan will fund $17 billion to expand free meals for children in the highest poverty districts (those with at least 40% of students participating in SNAP) by reimbursing a higher percentage of meals at the free reimbursement rate through CEP.
“Additionally, the plan will expand free meals for children in elementary schools by reimbursing an even higher percentage of meals at the free reimbursement through CEP and lowering the threshold for CEP eligibility for elementary schools to 25% of students participating in SNAP.
“Targeting elementary students will drive better long-term health outcomes by ensuring low-income children are receiving nutritious meals at an early age. The plan will also expand direct certification to automatically enroll more students for school means based on Medicaid and Supplemental Security Income data. This proposal will provide free meals to an additional 9.3 million children, with about 70% in elementary schools.
▪ “Launch a healthy foods incentive demonstration. To build on progress made during the Obama administration to improve the nutrition standards of school meals, this new $1 billion demonstration will support schools that are further expanding healthy food offerings. For example, schools adopting specified measures that exceed current school meal standards will receive an enhanced reimbursement as an incentive.
▪ “Facilitate re-entry for formerly incarcerated individuals through SNAP eligibility. Individuals convicted of a drug-related felony are currently ineligible to receive SNAP benefits unless a state has taken the option to eliminate or modify this restriction.
“Denying these individuals — many of whom are parents of young children — SNAP benefits jeopardizes nutrition security and poses a barrier to re-entry into the community in a population that already faces significant hurdles to obtaining employment and stability. SNAP is a critical safety net for many individuals as they search for employment to support themselves and their families. This restriction disproportionately impacts African Americans, who are convicted of drug offenses at much higher rates than white Americans.”
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