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Scott Squillace

Financial Planning > Tax Planning > Tax Reform

Biden’s Billionaire Tax Plan Is Doomed, Estate Lawyer Says

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Under President Biden’s “Billionaire Minimum Income Tax” proposal, individuals with a net worth of more than $100 million would at death be paying what amounts to a double tax on capital gains, Scott Squillace, tax and estate attorney, says in an interview with ThinkAdvisor.

The accelerated capital gains tax on unrealized appreciation of securities in Biden’s plan is “being characterized as a prepayment so that later, if the assets are sold, you’ve already paid the capital gains tax and don’t have to pay that again.”

But “you would effectively lose the benefit of the step-up in basis,” so the estate tax would amount to a second tax at death on the same assets, the founder of Squillace & Associates maintains.

Be that as it may, the accredited estate planner believes that Biden’s plan for the nation’s 0.01% of earners to “pay their fair share,” as the president puts it, is as doomed as doomed can be.

There’s “an icicle’s chance in hell” that Congress will pass it, Squillace says.

His firm focuses on estate and tax planning for small-business owners and professionals such as physicians and attorneys. It also specializes in the LGBTQ community and international estate and business planning.

Biden proposes at least a 20% tax on total income including unrealized capital gains for people with a net worth of more than $100 million. Right now, billionaires pay 8% of total realized and unrealized income, according to the White House.

In the interview, Squillace theorizes a way to adjust the tax rate so that ultra-wealthy folks will no longer be paying taxes that are lower than those of nurses and teachers.

He notes, however, that “that would cause the whole system to be turned upside-down and inside-out.”

ThinkAdvisor recently interviewed Squillace, who was speaking by phone from Boston.

About the wealth tax, he says: “The real issue is: How do you define someone’s net worth? That’s a Pandora’s box.”

Here are highlights of our interview:

THINKADVISOR: What do you think the chances are of President Biden’s “Billionaire Minimum Income Tax” plan passing?

SCOTT SQUILLACE: I put it in the category of an icicle’s chance in hell. Even the Senate might find it problematic.

There are so many issues in terms of how the wealth gets calculated. It was fatally flawed from the get-go.

Just how would the plan affect the mega-wealthy?

It would accelerate the capital gains tax on unrealized gains. Typically, investment income that appreciates gets taxed once the gain is realized upon a sale of the assets.

But Biden says that unrealized gains would not be taxed under the plan. He calls that aspect a prepayment or withholding tax on future capital gains. Your thoughts?

It’s being characterized as a prepayment so that later, if the assets are sold, you’ve already paid the capital gains tax and don’t pay again.

The administration is spinning it [as though] it wouldn’t be a double tax. But it would be, at death.

Please explain.

It would have an effect on the estate tax [for taxpayers who are above the exemption] because typically you get a step-up in basis at death so that the capital gains tax is wiped out.

But in this new scenario, you’d wind up paying the capital gains tax and still pay the estate tax. So there would be a double tax.

The same assets would be re-taxed at death because you would effectively lose the benefit of the step-up in basis since you would have already paid the capital gains tax.

Would Biden’s plan have a spillover effect to other taxpayers who aren’t as wealthy?

There’s nothing I’ve seen that shows it would spill over to anyone whose net worth isn’t above $100 million.

Please elaborate on the challenges in calculating taxpayers’ wealth.

The real issue is: How do you define someone’s net worth? That’s a Pandora’s box because historically, no one has ever reported their net worth to the IRS. They report their income.


In order to figure out whether or not this tax [applies to you], you have to report the value of your assets and marketable securities.

But there’s a closing price every trading day. And things like private business interests, private equity, hedge funds, real estate — all sorts of alternative investment classes — have no market value: You have to get an appraisal.

And businesses can play games with how they value their liquid assets.

Is there another way for the ultra-wealthy to pay more in taxes — “their fair share,” as the president puts it?

I’m sure there are all sorts of ways by closing some of the loopholes and reducing their effective tax [to] a minimum rate that would apply to everyone. That’s how you can get at it. But the tax code is complex, and all kinds of loopholes are baked into it.

Warren Buffett has said that his effective tax rate is lower than his secretary’s. There are ways to deal with this [in general] by eliminating loopholes that the wealthier taxpayers enjoy, which have the effect of reducing their effective tax rate.

But that would cause the whole system to be turned upside-down and inside-out, and there are a lot of vested interests, including [those of] a lot of senators who enjoy the benefit of the loopholes too.

Sen. Kyrsten Sinema, D-Ariz., says she likes Biden’s plan. Right?

Yup, she does. That’s one of 100. I suspect that Sen. [Elizabeth] Warren [D-Mass.] likes it too.

Would there be challenges in the plan’s administration?

There are a lot of problems with that. The reality is that with [current] IRS staffing, it would be an impossibility to administer it effectively.

Biden tried to pass a billionaire income tax plan last March, but Sen. Joe Manchin, R-W.Va., opposed it. Correct?

He killed it.

Some years ago, French authorities tried to implement a wealth tax. But for all the reasons I just mentioned, they weren’t successful.

They had to step back from it because they couldn’t get an honest valuation on people’s assets.

So now it’s just a tax on the value of their real estate, not all of their wealth.

Could a compromise be reached on Biden’s plan?

My guess is that the Republican House of Representatives isn’t going to pass any tax increases. Full stop.

(Pictured: Scott Squillace)


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