Many expected Joe Biden’s Presidency to be the third term of Barack Obama. Certainly, Biden has peppered his administration with veterans of the Obama years. But on policy, the Biden administration looks increasingly like a replay of the four years of the Jimmy Carter presidency. A combination of “Groundhog Day” and a Seinfeld episode with “no learning.”
Higher taxes. More spending. Increasing gas prices. Inflation pushing Americans into higher taxes. Fighting against increasing American energy production and then telling Americans to be ready to live with less and more expensive energy. Can’t afford to heat your home? Wear a sweater. Drive 55.
Two major initiatives of the Biden presidency: ending the step-up in basis when parents pass a home, farm, or small business to their children and attempting to hike the capital gains tax are directly plagiarized from the Carter years.
Biden’s demand that the capital gains tax, now 23.8 percent be increased to 43.4 percent would make capital gains taxes on Americans more than twice as high as China’s 20 percent. And Americans paying capital gains taxes—26 million Americans filed capital gains when they paid their 2018 taxes. Taxpayers not only pay the federal capital gains tax but also the state capital gains tax which in California is 13.3 percent, creating a combined federal-state capital gains tax of 56.7 percent.
Carter pushed to increase the capital gains tax in 1978. And with increasing inflation, much of the taxed “capital gain” was simply a tax on inflation. But after an uprising from middle-income households around the country, the Democrat-controlled Congress demanded that the capital gains tax rate be reduced. Carter gave in to the Democrat Congress and the capital gains tax rate was reduced. Ronald Reagan reduced it further.
And once again what happens when the capital gains tax rate was reduced? The incoming revenue to the government actually increased through greater economic activity.
Biden’s second repeat of a Carter-era mistake is his demand to take away your “step-up in basis” which will result in a second death tax: Under Biden’s plan, when a family business is passed on to sons and daughters the children are immediately forced to pay a capital gains tax on the increase in the value of the business during the lifetime of their parents. This is separate from – and in addition to – the existing death tax. With even modest inflation this is a huge chunk of change demanded not when the business or farm is sold but at the death of the parents. This would force you to sell the business to pay the tax or borrow heavily to pay the tax.
This was done in 1976 when Democrats have overwhelming control of Congress following the Watergate election of 1974. The repeal of the “step-up in basis” was so complicated it was never actually put into practice and the repeal was itself repealed and signed by Carter in 1980 before Reagan became president.
So Biden is proposing/demanding that Congress pass a law that Democrats tried before and was rejected by Democrats during Carter’s term. What was the definition of insanity—doing the same thing again and expecting a different result?
On energy, Biden is again channeling his Inner Carter. Carter wanted to force Americans to use less heat in the winter and less air conditioning in the summer. This was because we were running out of oil. Carter suggested hiring thousands of young Americans to monitor your thermostats at home.
Biden knows there is no shortage of oil or natural gas — he saw the boom when Donald Trump stopped Obama’s anti-development policies and America became the world’s largest producer of oil and gas, actually exported product and drove down prices. Biden is working to re-create the gas lines by shutting down and stalling pipelines. And he stopped new production on federal land. He killed the KeystoneXL which would enable endless quantities of Canadian oil to flow into the United States—without the security concerns of oil from across the Atlantic.
Biden has called for hiring hundreds of thousands of unionized young bureaucrats to “monitor” our energy use and tell Americans how to heat or air-condition their homes. Biden doesn’t like the Fourth Amendment.
The Carter policies created massive inflation, job loss, reduced investment, and higher energy prices. Biden wants that and wants us to return to those policies that were so painful to so many Americans.
Grover Norquist is the President of Americans for Tax Reform.