President Biden recently released his US$5.8 trillion fiscal year 2023 (FY23) budget proposal, which he plans to fund through tax hikes that may impact private forest landowners. Source: Timberbiz
The budget proposal relies heavily on an annual 20% tax on taxpayers with income and assets exceeding US$100 million.
While the tax is being dubbed as a “billionaires tax” taxes enacted under the guise of only affecting the wealthy inevitably end up hitting the middleclass, particularly private forest landowners and businesses that have owned their land for multiple generations and therefore carry a large number of unrealized gains.
The Forest Landowners Association (FLA) joined with the Family Business Coalition to send this letter to President Biden opposing this new tax.
“The administration’s proposed FY2023 budget contains a number of concerning policies for family businesses, including taxing unrealized capital gains. Last year, both the small business and agriculture communities identified taxing unrealized capital gains at death – a kind of ‘double death tax’– as an unworkable policy for family businesses. Multiple Senate votes and its exclusion from the House Ways and Means Committee draft might have led one to believe the threat was over, only to see a similar concept resurrected now in the administration’s FY2023 budget.
Taxing phantom gains in any form has the potential to create serious liquidity issues for privately held businesses. At a time when many family businesses are still struggling to recover from the pandemic and retain workers, levying a new tax on unrealized capital gains is inconsistent with the goal of helping businesses lead the country towards recovery. Under this budget, business owners would be taxed on asset growth derived solely from rapidly rising inflation and on assets that are never actually sold. This amounts to an inflation tax on family businesses.
While the tax is being dubbed as a ‘billionaires tax’ historically taxes enacted under the guise of only affecting the wealthy, like the Alternative Minimum Tax, inevitably end up hitting the middle class. The proposed exemptions are unimportant considering the long term threat this form of taxation poses to family owned and operated businesses.
This administration and Congress should be focused on creating certainly for America’s small businesses as many are still struggling just to stay afloat and millions of others have closed their doors permanently.
Taxing unrealized gains in any form, subjecting more families to the estate tax, changing step-up in basis, and removing important tools that family businesses use for succession planning are not ideas that are likely to help spur job creation and economic recovery.
Earlier this year, 112 small business groups joined a letter strongly opposing many of these policies. That letter is attached here for your reference. FBC respectfully urges your administration return to the drawing board to develop a budget more likely to help family businesses and their workers succeed.”
