"Closing the Billionaire Borrowing Loophole Would Strengthen the Progre" by Edward Gellis Fox and Zachary Liscow
 

Document Type

Report

Publication Date

2024

Abstract

The vast majority of Americans are concerned that some wealthy people don’t pay their “fair share” of federal taxes. They’re right to be bothered: Loopholes in the U.S. tax code allow some billionaires to pay taxes equal to only 1 percent of the increases in their wealth, which tax textbooks across the country consider “income.”

How is this possible? The low effective tax rate arises in part because U.S. billionaires with large stock portfolios and other appreciated assets can borrow money using their considerable financial assets as collateral and then pay little to no taxes on the cash they use to finance their lifestyles. Some of the wealthiest people in the United States take advantage of this loophole, including Larry Ellison and Elon Musk. Without borrowing, they would have to sell more of their appreciated assets, “realizing” these gains and thus triggering income taxes.

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© Equitable Growth 2024. Reproduced with permission. All rights reserved.


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