Since I might have been the last Democrat for some time to come that West Virginians will send to represent them in the U.S. House of Representatives, I feel particularly qualified to speak to the Democratic Party’s ability to unknowingly isolate states like West Virginia.
I also believe Democrats can avoid alienating rural states by keeping family-owned businesses and farms in mind.
Right now, Democrats are in a unique position to help every American recover from the economic woes of the coronavirus pandemic, but some of their choices, however well-intentioned, actually hurt the very people they are trying to help. Over the past year, Congress passed trillions of dollars in aid to help families and businesses stay afloat during the pandemic, but more than 20% of small businesses didn’t make it.
With Congress considering a $3.5 trillion reconciliation package, in part to continue the pandemic recovery effort, they are going to have to pay for the bill somehow. I’ve seen that some Democrats are looking to increase taxes on corporations and wealthy individuals to pay for their spending, which shouldn’t come as any surprise. However, some of these provisions will actually make it harder for our family-owned businesses and farms to stay open.
One of the provisions they are considering is removing the capital gains step-up in basis at death. Some in Congress believe this will only affect wealthy people and fix a loophole to ensure the rich pay their fair share.
In actuality, it would force small businesses and family farms to pay a 43.4% tax on inherited assets and a 40% estate tax. That amounts to a 83.4% tax, a punitive measure that small businesses simply can’t afford, especially now.
If passed into law, this tax provision would lead to the liquidation of thousands of family-owned businesses across the country and the loss of thousands of jobs. We know this because Congress removed the step-up in basis in 1976 and 2010, but had to immediately reverse the decision because of the detrimental consequences on communities across the country.
We also know that the carve-outs included in the tax proposal do not work because Congress has tried and failed to protect small businesses through carve-outs before. In practice, if the exemption is wide enough to protect our family-owned businesses, it would essentially nullify the estate tax altogether.
These are the types of proposals Democrats believe will help — and they are certainly well intentioned — but we know from previous experience that they won’t. They will hurt the very communities they are trying to protect, will alienate rural voters across America and, ultimately, will lose crucial elections in swing states that rely on family-owned farms and businesses.
Democrats, such as Rep. Cindy Axne, one of the few elected Democrats left in Iowa, are sounding the alarm about how harmful this will be to her state — and those harmful effects will be blamed on Democrats.
In a country as politically divided as ours, and with the Democrats’ slim majority in the House and the Senate, these considerations are important to secure long-term control of the majority, to effect lasting change for all Americans. Democrats have a chance to prevent a very real problem for our country and their politics.
My fellow Democrats, to grow their base and majorities, should remove this provision that will do more harm than good.