I'm not clear on what is being proposed. From your link (emph mine):
Biden’s proposal would ultimately raise would depend on how he structures the elimination of step-up in basis. He could require heirs to take on the decedent’s basis when they receive an asset, known as carryover basis, but still allow heirs to defer realization of that inherited asset’s capital gain. This would raise much less than making death a taxable event—and even then, proposals to tax capital gains at death can have many exemptions.
So if heirs take on the cost basis, at least they have some flexibility on when to realize those gains, which is better than the Estate Tax which is (was? not sure of newest rules) due in 90 days from DOD. But is this the proposal, or just a guess on options they may take?
I found this analysis interesting (regarding increasing cap gains tax in general):
Specifically, the CBO and JCT estimate that the elasticity of realizations to the tax rate is -1.2 in the short run and -0.79 in the long run. Specifically, a 1 percent increase in the capital gains tax rate would result in a 0.79 to 1.2 percent drop in capital gains realizations.
And...
Part of the reason why there is such a strong incentive to defer the tax on capital gains is that if an individual defers long enough, the tax on the asset will eventually be forgiven. Without step-up in basis, a taxpayer has a greater incentive to realize during their lifetime. As such, eliminating step-up in basis can indirectly boost revenue from capital gains.
True. I've looked at my portfolio, and my plan is to draw down the investments with the highest % of unrealized gains last, expecting them to pass to heirs at the step up basis. That would make sense anyhow, but having the opportunity to totally defer the cap gains makes it more important financially.
I also feel it is a bit unfair to expect heirs to know what the cost basis is. They didn't buy it, they don't have the records, how do they know? For recent broker purchases, the brokers are tracking cap gains, but many people own stocks/funds from before that time. Heck, my FIL had paper shares!
Regardless, and we have to get a little political here, because it can't be separated - these proposals morph to get them passed, no telling what they might be by that time.
-ERD50