BISMARCK — As lawmakers in Washington, D.C., grapple over President Joe Biden’s priority $3.5 trillion climate and social policy bill, some contentious tax policy reforms initially intended to help finance the massive package are no longer on the table.
These cuts came in the wake of an opposition blitz from corporate interest groups, as well as the objections of one Democrat well-known to North Dakotans: former Sen. Heidi Heitkamp. Earlier this year the one-term Democrat helped launch the nonprofit Save America’s Family Enterprises to advocate against a proposal to overhaul the country’s approach to capital gains taxation.
Among those pushing for reform to this arcane tax policy was the Biden White House, which had mapped out a plan to pay for its massive, priority spending bill using a slate of tax hikes on corporations and the super rich.
Late this summer, Heitkamp’s opposition to the president’s proposal came under fire from liberal corners, with charges that the Democrat had fallen into line with moneyed interests even as she reversed her position of just a few months prior.
In an interview, Heitkamp told The Forum that “the criticism comes from a complete lack of understanding about tax policy.”
The former senator, who also served as North Dakota tax commissioner from 1986 to 1992, argued that altering these tax provisions would have devastating spillover effects for small family farms, which depend on the ability to pass down large acreages of land from generation to generation.
Under current law, when the owner of a large estate dies, the heirs don’t owe any taxes on the inheritance unless and until they sell it. If they do eventually sell, they only owe taxes on the amount that inherited stocks, equity or physical property assets has appreciated from the time of the original owner’s death, a rule known as “stepped up basis.”
As part of a blueprint to fund the $3.5 trillion social spending package, the Biden administration was looking to apply a tax on gains in large fortunes at the point of the original owner’s death. That change would have also overhauled the stepped up basis law, a provision that incentivizes wealthy Americans to hold onto their assets and borrow against them.
But when a U.S. House committee released draft legislation for the budget reconciliation bill’s tax provisions in mid-September, the taxation-at-death provision that Heitkamp had opposed didn’t make it in. The draft proposed tax reforms to account for $2.9 trillion in additional government revenues for the next 10 years, according to reporting in the Washington Post.
Heitkamp said she supported several of the alternative measures that the committee put forward, including rate increases on capital gains and corporate taxes. She added that she would be supportive of reforms to the stepped-up basis if they targeted assets like stocks and equity ownership but not property that people depend on for their livelihoods, like land.
"That's part of the kind of Midwest idea here," Heitkamp said. "There's a lot of people who own property who are cash poor."
The former senator noted that the proposal has been opposed by several sitting Democratic senators from rural states and prompted a letter from 330 agricultural groups calling on Congress not to make the change.
The North Dakota Farmers Union was not among those groups, though several other agricultural interest groups in the state were.
Mark Watne, president of the North Dakota Farmer’s Union, said his organization is opposed to the elimination of the stepped-up basis provision unless it comes with carve-outs for family farms.
“We do believe that, unless it’s done properly with some exemption, then it could be a problem for agriculture,” he said. “That’s the challenge.”
Democratic-NPL Party Executive Director Michael Taylor said his party does not have a position on the specifics of the tax policies being hashed out in Washington, but added that "we always trust Sen. Heitkamp to be looking out for, certainly rural America, but also North Dakota."
Heitkamp said she believes the scrapped Biden plan could have been a further setback for liberal hopes in rural states.
"When the policies of the Democratic Party are not consistent with what I think could be an opportunity to elect Democrats again in North Dakota, I'm going to speak up," she said.
In addition to a coalition of moderate Congressional Democrats like Sen. John Tester of Montana, the capital gains reforms were heavily opposed by business interest groups and Republican lawmakers. Among them was Heitkamp’s 2018 challenger Sen. Kevin Cramer, whose office declined to comment on the recent debates over his onetime opponent's recent advocacy.
Readers can reach Forum reporter Adam Willis, a Report for America corps member, at email@example.com.