Higher income tax rates for top earners, along with a 39.6% capital gains rate for those earning $1 million or more, mean that many wealthy taxpayers will see a significant increase in the levies they owe annually and when they sell major investments, such as stocks or businesses.
Repealing the step-up in basis provision would end a long-standing tax break that wipes away the capital gains on an asset when it is inherited, meaning that much of the appreciation on securities, properties and small businesses goes untaxed when the original owner dies.
Spending billions more on audit is intended to reverse a multi-year trend of falling audit rates at the IRS. Commissioner Chuck Rettig told a congressional panel this month that as much as $1 trillion in taxes may go uncollected each year. He said the agency has lost 17,000 enforcement personnel since 2010. Democrats in Congress have been proposing ways to increase audit levels by adding to the agency’s enforcement workforce and mandating higher examination rates of top earners.
A pot of $80 billion over a decade specifically for IRS enforcement, which averages to $8 billion in additional funding per year, would be a significant increase to the IRS, which has an annual budget for the entire agency of about $11.9 billion for fiscal year 2021.
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