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As a high-ranking Biden aide pushes Congress to raise inheritance taxes, his brother lobbies against it

The Washington Post logo The Washington Post 7/9/2021 Michael Scherer, Jeff Stein, Sean Sullivan
a large building: Capitol Hill lawmakers are hearing opposing pitches from White House senior counselor Steve Ricchetti and his lobbyist brother, Jeff Ricchetti, on an estate tax proposal. © Stefani Reynolds/Bloomberg News Capitol Hill lawmakers are hearing opposing pitches from White House senior counselor Steve Ricchetti and his lobbyist brother, Jeff Ricchetti, on an estate tax proposal.

The brother and former business partner of a top White House adviser has been hired to lobby Democratic senators to oppose a central plank of President Biden’s legislative agenda that would raise taxes on the inheritors of large estates.

Lobbyist Jeff Ricchetti is helping to lead an effort by a life insurance trade group to preserve the practice of “stepping up” the basis for capital gains taxes when property is inherited. Under the current system, wealthy heirs pay capital gains taxes only on increases in value that occur after they take possession of property. Under the Biden proposal, they would pay capital gains taxes from the time the property was first acquired by the previous owner.

White House senior counselor Steve Ricchetti, Jeff’s brother, has at the same time been working against his efforts by championing Biden’s proposal on Capitol Hill, including a crucial part of the administration’s plan to pay for upcoming spending programs.

The conflicting interests within an influential Democratic family speak to the often insular, and revolving, roles of power players in Washington. As recently as 2008, Steve Ricchetti worked alongside his brother lobbying for the same life insurance trade group on estate tax issues, according to federal filings. A little more than a decade later, he chaired the Biden campaign, where he helped craft the stepped-up-basis proposal.

Biden singled out the provision in a Wednesday speech at McHenry County College in Crystal Lake, Ill., calling it a “loophole” and saying that closing it would generate $400 billion in government revenue. That would cover the cost of extending the child tax credit under his American Families Plan, Biden said.

He described being a wealthy person who plans to sell appreciated stock but whose heirs, after his sudden death, don’t have to pay capital gains tax.

“If on the way to cash it in, I get hit by a truck, God forbid, and died, and it was left to my daughter, there’d be no tax paid,” Biden said. “It’s not inheritance tax — it was a tax due 10 seconds earlier.”

But to Finseca, the trade group that represents financial planners and life insurance brokers and that has hired Jeff Ricchetti as its lobbyist, the proposed change would add unworkable complexity to the tax code, forcing those who inherit large amounts of property to uncover the original costs of those assets and come up with cash to pay the tax after a death.

Finseca chief executive Marc Cadin said his industry has worked with Jeff Ricchetti on these issues for 20 years and previously worked with his brother as well. He confirmed Jeff Ricchetti’s role in lobbying Democrats in the Senate.

“The Finseca position for 20 years has been for permanent, sustainable estate tax reform that allows our members’ clients to plan with certainty,” Cadin said. Biden’s stepped-up-basis proposal is “just bad policy from our vantage point.”

Both Jeff and Steve Ricchetti say they do not speak to each other about work, and Jeff Ricchetti said in June that he had stopped lobbying Biden’s office directly. A White House official, speaking on the condition of anonymity to discuss internal deliberations, pointed to the inheritance tax situation as evidence that the two operate independently.

Biden has said his own family will not be involved with his administration, but that ban does not apply to his advisers.

Jeff Ricchetti did not respond to several requests for comment on his work.

In response to a request for comment from Steve Ricchetti, White House spokesman Andrew Bates said, “Steve is proud to be fighting for this long-standing goal of the president’s, just as he was proud to advance the proposal during the campaign.”

a man wearing a suit and tie: Steve Ricchetti, counselor to the president, once worked as a lobbyist alongside his brother. © Manuel Balce Ceneta/AP Steve Ricchetti, counselor to the president, once worked as a lobbyist alongside his brother.

Steve Ricchetti, who co-founded a lobbying firm with his brother in 2000, stopped working as a lobbyist in 2009 and separated from the family lobbying firm in 2012, when he went to work as an adviser for then-Vice President Biden.

For Jeff Ricchetti, the rise of Biden and his brother has been good for business: He has signed 12 new clients since the campaign his brother chaired secured the Democratic presidential nomination in 2020, including four clients for whom he lobbied Biden’s office. Jeff Ricchetti reported making $820,000 from lobbying in the first three months of this year, nearly five times what he earned in the same period a year earlier.

Government watchdogs have raised concerns about the close family relations between two influential people, even if they’re working on opposite sides of the same issue.

Danielle Brian, the executive director of the Project on Government Oversight, a watchdog group, said the relationship raised troubling questions.

“You can see why there is a general distrust of the political elite,” she said. “This is a perfect example of why a big part of our country does not trust Washington or whose side they are on.”

The work for Finseca, for which Jeff Ricchetti billed $50,000 between January and March, targets a fundamental feature of Biden’s plan to pay for expanding the government safety net and climate-related programs. The president has proposed nearly doubling the capital gains rate paid by wealthy investors earning more than $1 million, as well as limiting how wealthy investors can avoid capital gains taxes when they pass assets down at death.

Tax experts have found that the two proposals have to move together to be effective at raising substantial new revenue. If Congress passed only the increase in the capital gains rate, Biden’s plan would lead federal revenue to fall by about $33 billion over the next 10 years, as the wealthy held on to their assets, according to the Penn Wharton Budget Model, a nonpartisan budget forecaster. Passing both would increase federal tax revenue by more than $100 billion, Penn Wharton found.

“The core element of Biden’s plan turns on taxing capital effectively, and the linchpin of that is collecting a tax on the unrealized gains at death — or they’ll escape taxation completely,” said Steve Rosenthal, a tax expert at the Tax Policy Center, a nonpartisan think tank. “Billionaires and the superwealthy create dynastic wealth by avoiding selling their stocks until death. If we just raised the capital gains tax rate, the rich would just carry their assets to death and avoid them. But if we’re going to tax them at death and induce more sales, that gives Biden much more latitude. It’s absolutely crucial to his plan.”

Biden’s proposal to repeal the current rules faces other political challenges, particularly from farm groups that are increasingly vocal in complaining that the plan could hit agricultural producers. The White House has stressed that the plan includes exemptions for family farms that continue to operate, as well as for people whose assets increase by up to $1 million for an individual.

Congressional aides view Sens. Mark R. Warner (Va.) and Maggie Hassan (N.H.) as the Democrats on the Senate Finance Committee most likely to oppose Biden’s plan. Spokespeople for Hassan did not return requests for comment.

Rachel Cohen, a spokeswoman for Warner, said the senator did not yet have a position on the Biden proposal. Jeff Ricchetti had not lobbied him on the matter, nor had he lobbied any of the senator’s aides “as far as I can tell,” she wrote in an email.

Jeff Ricchetti brought up the issue of the stepped-up basis with Sen. Ron Wyden (D-Ore.), the chairman of the Finance Committee, according to a Wyden aide.

“The issue was raised with Senator Wyden in his personal capacity, and his position has long been that wealthy heirs should pay tax on their investment gains,” said Wyden spokeswoman Ashley Schapitl.

Brian Riedl, a policy expert at the conservative-leaning Manhattan Institute, said Biden’s proposal to increase inheritance taxes could hurt U.S. growth and investment by leading investors to pull money out of the stock market to avoid higher taxes. He also said the plan would expose many assets to taxation that are already hit by the federal estate tax.

“A big challenge for conservatives is the estate tax already captures a lot of capital gains at death for wealthy families, and this could be seen as double taxation,” Riedl said. “Many more critics would be open to repealing step-up basis if it was done while paring back the estate tax. Otherwise, you’re taxing the same lifetime investments at a very high rate.”

Armstrong Robinson, the chief advocacy officer for Finseca, said in a video call with insurance professionals last month that he has been working with Jeff Ricchetti and that the proposal to change how the stepped-up basis works would amount to a fundamental shift in the tax system.

He warned insurance brokers that if the proposal did pass, large estates would need to plan differently for a death, since the tax on capital gains would be charged immediately.

“Whether you sell it or not, you owe the tax at death or at gifting, which would change a ton of the way most of your clients do their work,” Robinson said in the call.

“I don’t think they repeal step up in basis,” he later predicted.


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