Outside the Box: Elly Mae Clampett is the target of Biden’s tax plan, not Laura Ingalls

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Remember ol’ Jed Clampett from “The Beverly Hillbillies” TV show? His hardscrabble farm produced little more than moonshine until one day, as the theme song went, “he was shootin’ at some food, and up through the ground come a bubblin’ crude. Oil, that is, black gold, Texas tea.”

Jed then sold his land for $200 million in today’s dollars—more than enough to move into a Beverly Hills mansion and rile up his snooty neighbors.

Under current rules, Jed would’ve owed Uncle Sam just 20% of the massive capital gain he pocketed when he sold his property. That’s far less than the top tax rate of 37% on income from work.

Think that’s unfair? Well, change the scenario slightly, and it gets worse.

Stepped-up basis

If Jed had died before selling his oil-rich land, his daughter, Elly May, could have sold it without paying any income taxes at all on that increased value. That’s how the rule known as “stepped-up basis” works. When someone inherits property, the capital gains on that asset since their deceased family member first purchased it are reset to zero.

The fictional Clampetts have thousands of real-life, modern-day counterparts who strike it rich by selling land that has boomed in value because of the discovery of mineral deposits or development pressures. While everyone loves a rags-to-riches story, these windfalls should be taxed fairly.

An even-bigger problem is how wealthy family dynasties have exploited the stepped-up basis loophole to pass property from one generation to the next without ever paying a capital-gains tax. Rather than selling their property, the ultrarich can simply borrow against it at low interest rates if they ever need extra cash.

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This is just flat-out fearmongering, since farm families that love their rural way of life and have no intention of selling out wouldn’t have to pay the IRS an extra dime.
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President Joe Biden wants to put an end to this tax scam for the rich while protecting ordinary families. Under his proposal, someone who inherits property would owe taxes on the full increase in value since their family member first purchased it—but the first $1 million in appreciation (or $2 million if inherited from married parents) would be exempt. Heirs could also defer their tax payments for up to 15 years.

Exempt family farms and businesses

The protections would be even greater for family farmers and small-business owners. Under the president’s proposal, these families could defer tax payments on inherited property indefinitely, even for multiple generations, as long as they continue to use the assets for farming or business purposes.

So if you’re an Elly May Clampett and you sell inherited property that’s ballooned in value by more than $1 million, you would pay more in taxes. And if you’re an heir of a billionaire farmland owner like Jeff Bezos, you would pay a lot more.

But if you’re more like the humble Ingalls family from another 1970s TV show, “Little House on the Prairie,” you would have nothing to worry about.

Ordinary families would also benefit from the public infrastructure, education, and health-care improvements that could be financed with tax revenue from closing this loophole for the rich. Combined with a proposed increase in the capital-gains tax rate for people making more than $1 million a year, Biden’s modification of the stepped-up basis rule would generate more than $300 billion over a decade.

But powerful lobby groups and politicians are sending a completely different, ominous message. Sen. Chuck Grassley, for example, recently called Biden’s proposal a “death knell” for family farms and small businesses in The Wall Street Journal.

The Iowa Republican’s op-ed is part of a massive disinformation campaign to scare families into thinking they’ll have to sell land they inherit just to pay a huge new “death tax.” This is just flat-out fearmongering, since farm families that love their rural way of life and have no intention of selling out wouldn’t have to pay the IRS an extra dime.

Misinformation campaign to help the rich

Grassley and other opponents of Biden’s plan are just using family farmers as the faces of a PR campaign that is really about preserving huge tax subsidies for the rich.

If their deceptive propaganda is successful, hardworking family farmers and ranchers won’t be the winners. Elites who’ve rigged the tax system for their own benefit will notch one more victory. And the Ingalls and the rest of us will get stuck with the bill.

Bob Lord, an Institute for Policy Studies associate fellow, is tax counsel to Americans for Tax Fairness. Sarah Anderson directs the Global Economy Project at the Institute for Policy Studies and co-edits Inequality.org.