The One Big Beautiful Bill (OBBB) Act was passed along party lines.
Its Republican authors promised it is the tax (and more) measure the country needs. Democrats disagreed, rejecting the second major tax law to come under a Donald Trump administration.
During the bill’s fast-tracked legislative process, Democrats argued that the OBBB favors wealthy individuals at the expense of lower- and middle-income Americans.
That political perspective has picked up some traction off Capitol Hill. The U.S. public is generally skeptical of the massive public policy package, according to a recent poll by Pew Research Center.
Now, Democrats are trying to take advantage of that negative public perception.
And a group of federal lawmakers are specifically targeting the country’s highest earners in a bill they say would collect more tax from the very wealthiest Americans.
Narrowly focused tax proposal: The Billionaires Income Tax Act was unveiled today by Sen. Ron Wyden (D-Oregon) and Reps. Steve Cohen (D-Tennessee) and Don Beyer (D-Virginia).
The trio says the measure, with identical legislative language in the Senate and House versions, would apply to fewer than 1,000 taxpayers. They are the U.S. taxpayers with more than $100 million in annual income or more than $1 billion in assets for three consecutive years.
But though they be small in number, their taxed vast wealth would raise more than $500 billion in revenue for the U.S. Treasury.
Some of that money, according to the Billionaires Income Tax Act sponsors, could be used to shore up popular public programs such as Social Security and Medicare.
The lawmakers also point out that the additional money would come without raising any tax rates. Rather, the proposal focuses on accounting methods already used in the tax code.
Ending ‘buy, borrow, die’ tax strategy: The measure’s sponsors say the changes they propose would end the ability of high income and high net worth taxpayers to use tax planning strategies that reduce their tax obligations.
Dubbed the “buy, borrow, die” method, it involves —
- Buying assets, such as stocks and real estate that grow in value.
- Borrowing against those assets to fund, tax-free, their lifestyles.
- Passing along their wealth to heirs tax-free.
Wyden, Cohen, and Beyer propose that these rich individuals pay tax on the income they earn on an annual basis. This would be achieved by mark-to-market taxation.
Essentially, the wealthy taxpayers tradable assets, such as stocks that are easily valued on an annual basis, would be taxed on gains or the owners could take deductions for losses, regardless of whether they sell the asset.
Taxpayers would be able to carry back their losses for up to three years in certain circumstances. This will ensure billionaires start paying tax on their income each year, just like most U.S. taxpayers do on their ordinary income.
Deferral charge on some asset gains: Additionally, the bill would require that when a billionaire sells a nontradable asset, such as real estate or a business interest, the seller would pay their usual tax, plus a deferral recapture amount.
This is akin to interest on tax deferred while the individual held that asset, say the bill’s sponsors.
This approach also simplifies compliance by eliminating the need for annual valuations of these nontradable assets, according to Wyden et al.
The amount owed is calculated by allocating an equal amount of gain to each year the billionaire held that specific asset, determining how much tax would have been owed on the gain in each year, and assessing interest on unpaid tax for the time the tax was deferred.
Transition and anti-abuse rules: The Billionaires Income Tax Act also would let the affected wealthy individuals pay the proposal’s resulting tax over five years.
The newly-taxed billionaires may also elect to treat up to $1 billion of tradable stock in a single corporation as a nontradable asset. This option, say the bill’s sponsors, will help ensure, for example, that an individual who founds a successful company is able to maintain controlling interest in the business.
Finally, the measure’s supporters say it also contains rules to prevent avoidance of the Billionaires Incomes Tax.
Billionaire tax redux: While Wyden, Cohen, and Beyer announced their Billionaires Income Tax Act today, it is not a new idea. Nor is it a new piece of legislation.
Wyden, who currently is the ranking member on the Senate Finance Committee, has introduced similarly named bills in previous congressional sessions. But today’s introduction in both federal legislative chambers makes it the first time it has been a bicameral proposal.
It also already has 20 cosponsors on the Senate side of Congress. Plus, dozens of public interest organizations, led by Americans for Tax Fairness, already have announced their support for the Billionaires Income Tax in a letter sent to all members of Congress.
Will that make the 2025 version any more likely to be passed? In this current Congress, no.
However, the components of this latest Billionaires Income Tax Act definitely will show up in Democratic media and public appearances. And, of course, on the midterm election campaign trail.
You also might find these items of interest:
- Higher state taxes don't drive away wealthy residents
- Why the rich pay at a lower tax rate than the rest of us
- Most Americans favor raising taxes on higher-earners and big businesses
