Sen. Ron Wyden, D-Ore., is floating once again the Billionaire Income Tax Act, which would curb the "buy, borrow, die" tax avoidance strategy.
The bill "attempts to address one of the ways super-wealthy families avoid paying taxes," said Jeff Bush of The Washington Update. The buy, borrow, die strategy is "based on the premise that borrowing against one’s securities to create needed income, allowing the borrowing costs to accumulate while living, and then taking advantage of stepped-up basis at death is a lot less expensive than paying taxes on sold assets to create income."
As Bush explained, "the mechanism employed to generate revenue is by marking to market any readily marketable assets. Non-marketable assets have a recapture component at the time of sale (tax and interest on deferred gains)."
Wyden said the bill would apply to fewer than 1,000 taxpayers and raise more than $500 billion, which could be used to help shore up funding for vital programs like Social Security and Medicare, and that only taxpayers with more than $100 million in annual income or more than $1 billion in assets for three consecutive years would be covered.
"But what happens if that’s not enough revenue?" Bush asked. "Once introduced, it could prove to be a slippery slope where the excess revenues are insufficient to satisfy Washington's spending habits, so we simply lower the income or wealth thresholds."
In a statement, Wyden said the proposal "draws on accounting methods already used in the tax code and raises revenue without increasing any tax rates.”
With President Donald Trump a reported billionaire, "it seems very unlikely it would ever be signed into law. I believe there will have to be a joint coalition of Democrats and GOP populists to make this a possibility, and that seems pretty far off at this point," Bush said.
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