Ex-Democratic senator launches effort to advocate against capital gains proposal

Former Sen. Heidi Heitkamp (D-N.D.) is leading a new effort to push back against proposals to tax capital gains at death, as the Biden administration and Democratic lawmakers seek to make such a change to help pay for their spending priorities.

“I think it’s wrong as a matter of economics, looking at middle-class families, but I also think that for the Democratic Party, this is a path that should not be walked politically,” Heitkamp said in a phone interview with The Hill.

Heitkamp, who served in the Senate from 2013-2019, is chair of a new nonprofit called Save America’s Family Enterprises (SAFE), which is launching a six-figure ad campaign.

The launch of the new group comes after the House passed a $3.5 trillion budget resolution that will allow Democrats to pass a social spending package without any Republican votes. Democrats are now focusing on crafting the legislation, which they want to pay for through tax increases on wealthy individuals and corporations.

One way Democrats are looking to raise revenue is by changing the tax treatment of capital gains at death. Currently, capital gains are not taxed at death, and when heirs sell assets they inherited, they only have to pay taxes on the difference between the sales price and value of the investment when they received it, a concept known as “stepped-up basis.” Biden and a number of congressional Democrats have proposed ending stepped-up basis and taxing capital gains at death, with a $1 million exclusion.

Supporters of taxing capital gains at death argue that doing so would help to prevent wealthy Americans from avoiding taxes.

But Heitkamp argued that it would force sales of family-owned businesses and farms, as well as family-owned properties such as vacation homes. She also argued that the proposals could hurt minority-owned businesses.

“Now that we see an emerging entrepreneurial class within the Hispanic community and within the African American community, they won’t be able to take advantage of these tax rules that will allow them to grow their business and keep capital in their business,” she said.

Heitkamp also said that taxing capital gains at death carries political risks for Democrats, referencing a poll SAFE conducted that found that more voters were opposed to a proposal from Senate Democrats on this topic than supported it.

“I think it won’t be well-received by the public,” she said.

Biden has proposed protecting family-owned farms and businesses from taxes by deferring taxes on these assets as long as they remain family-owned and operated. The president’s proposal also would exempt the first $1 million of gains per person.

Heitkamp said that many Americans may think that wealthy and well-connected people will most likely benefit from any exemptions.

SAFE’s ads highlight examples of business owners whose families would be impacted by the Senate Democrats’ proposal to tax capital gains at death. The ads are expected to run in Washington, D.C., as well as “politically relevant media markets around the country,” according to a news release from the group.

It was not immediately clear who is funding SAFE. A spokesperson for the group said that it does not have to disclose its donors because it is a 501(c)(4) organization. 

SAFE isn’t the only group to criticize Democrats’ proposals to tax capital gains at death. Many Republican lawmakers and business groups have done so as well.

Some Democratic lawmakers, particularly from agriculture-heavy districts, have also raised concerns about the proposals.