Senator Ruben Gallego (D-AZ) has introduced a bill to close an apparent "buy, borrow, die" system that billionaires use to minimize the amount of money they are taxed on.
"Buy, borrow, die" means a person buys or is given assets like stocks, and because stocks fluctuate, holding onto them without selling means the money can continue to grow without being taxed (the buy).
Next, the owner of those stocks takes a tax-free loan backed by those assets to afford luxury items while the assets continue to fluctuate in value (the borrow).
Finally, when the person passes, they can pass on the assets to their heirs on a "stepped-up basis," meaning the assets can be sold tax-free (the die).
Sen. Gallego's Redistribution Of Billions by Instituting New High-Income Obligations on Overlooked Debt (ROBINHOOD) Act closes this loophole by treating the taking of a loan as a realization event, meaning capital gains taxes equal to the loan amount must be paid.
This system applies to taxpayers with income over $100 million and/or assets exceeding $1 billion.
"Working and middle-class Americans are paying their fair share – they do it with every paycheck. But the billionaires in this country? They're using legal loopholes and tricky accounting to finance private jets and yachts while most Americans struggle to afford healthcare and groceries," said Sen. Gallego in a press release. "My legislation closes a critical loophole and brings us closer to billionaires finally paying their fair share."
In April, the Arizona Senator backed the Millionaires Surtax Act, which places an additional 100% on incomes of more than $1 million for single earners and $2 million for married couples, applying equally to wages, salaries, capital gains, and other realized investment income, and the Stop Corporations and High Earners from Avoiding Taxes and Enforce the Rules Strictly (Stop CHEATERS) Act, which restores $83 billion in rescinded funding to the Internal Revenue Service (IRS).
