[Sen.] Gallego Introduces Legislation to Crack Down on Billionaire Tax Loophole

Legislation would close the ‘borrow’ aspect of the ‘buy, borrow, die’ tax loophole used by the ultra-wealthy to avoid paying capital gains or income tax

WASHINGTON – Today, Senator Ruben Gallego (D-AZ) introduced the Redistribution Of Billions by Instituting New High-income Obligations on Overlooked Debt (ROBINHOOD) Act to close the ‘borrow’ aspect of the ‘buy, borrow, die’ tax loophole that is used by the ultra-wealthy to finance extravagant spending without paying income or capital gains taxes.

“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 Senator Gallego. “My legislation closes a critical loophole and brings us closer to billionaires finally paying their fair share.”

Punchbowl News: Gallego targets ‘buy, borrow, die’ tax maneuver

The ‘buy, borrow, die’ tax loophole has three stages:

• Buy: A wealthy individual buys, or is given as part of their compensation package, assets, such as stocks. This allows them to store and grow their wealth without paying taxes since the gains from these assets are considered unrealized. 
• Borrow: The individual then borrows tax-free cash loans, often backed by those assets, to finance their extravagant lifestyles. All the while, their assets continue to gain value.
• Die: Finally, when they die, their assets are gifted to their heirs on a stepped-up basis, meaning their heirs can sell the assets without paying taxes on the capital gains accumulated during the individual’s life.

The ROBINHOOD Act closes this loophole by treating taking out a loan as a realization event, meaning the individual would have to pay taxes on capital gains equal to the loan amount. The provisions of the bill apply to taxpayers who have an income over $100 million and/or assets worth more than $1 billion. 

You can find a one-page summary of the legislation HERE.

You can find a section-by-section explainer of the legislation HERE.

You can find the full text of the legislation HERE.

Companion legislation was introduced in the House by Rep. Dan Goldman (NY-10).

“While working, wage-earning New Yorkers pay income taxes on every single paycheck, billionaires live tax-free by borrowing against their stock portfolios, real estate holdings, and art collections without paying a dime in taxes on that money,” Congressman Dan Goldman said. “By restoring basic fairness to our tax code and making the ultra-wealthy pay their fair share and contribute what they owe, this bill will generate revenue to invest in universal pre-K, child care, and working families instead of subsidizing billionaires’ yachts and private islands. It’s long past time for the wealthiest people in the country to pay their fair share.”