Senate Democrats aim to close loopholes for billionaires

A group of Senate Democrats and independents introduced legislation Thursday to curb tax breaks for billionaires.

The bill, known as the Billionaires Income Tax Act, would amend the Tax Code to eliminate tax loopholes that allow billionaires to defer tax indefinitely through planning strategies such as ''buy, borrow, die,'' and modify over 30 tax provisions so billionaires are required to pay taxes annually, and for other purposes.

It would expand on an accounting method already used in the Tax Code and would apply to approximately 700 taxpayers and raise hundreds of billions of dollars that could be used to help shore up funding for programs like Social Security and Medicare. Only taxpayers with over $100 million in annual income or more than $1 billion in assets for three consecutive years would be covered by the proposal. 

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Provisions include taxation of gains and losses from assets, according to a summary of the bill. Tradable assets such as stocks owned by billionaires would be marked to market each year so they would have to pay tax on gains or take deductions for losses, whether or not they sell the asset. Taxpayers would be able to carry back their losses for up to three years in certain circumstances. 

Another provision includes a deferral charge on gains from assets like real estate. When a billionaire sells a nontradable asset such as real estate or a business interest, they would pay their usual tax, plus a "deferral recapture amount," similar to interest on tax deferred while the individual held that asset. That approach would eliminate the need for annual valuations of these nontradable assets. The amount owed would be 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. The interest rate used would be the short-term federal rate plus one percentage point, and no interest accrues prior to the date of enactment of the proposal or the first tax year the individual is subject to the Billionaires Income Tax, whichever is later. 

As part of a transition, the first time the billionaires' tradable assets are marked-to-market, they could elect to pay the resulting tax over five years. They could also elect to treat up to $1 billion of tradable stock in a single corporation as a nontradable asset, to ensure the proposal doesn't affect the ability of an individual who founds a successful company to maintain their controlling interest. The proposal also includes rules to deter avoidance of the Billionaires Income Tax. 

Senate Finance Committee Chairman Ron Wyden, D-Oregon, introduced the bill, joined by 15 other senators.

"Right now, the average billionaire can wriggle their way into a measly 8% tax rate while a nurse or firefighter making $45,000 is paying a 22% tax on their wages," Wyden said in a floor statement. "Here's the real gut punch: under current tax law 'buy, borrow, die' is perfectly legal. Pretty sickening reality. Tax laws simply don't apply to billionaires in the same way they do to everybody else. They're optional, while everybody else's tax rules are mandatory."

He was joined by Sen. Debbie Stabenow, D-Michigan, Bob Casey, D-Pennsylvania, Sheldon Whitehouse, D-Rhode Island, Elizabeth Warren, D-Massachusetts, Brian Schatz, D-Hawaii, Mazie Hirono, D-Hawaii, Tammy Baldwin, D-Wisconsin, Sherrod Brown, D-Ohio, Bernie Sanders, I-Vermont, Jeff Merkley, D-Oregon, John Fetterman, D-Pennsylvania, Tina Smith, D-Minnesota, Peter Welch, D-Vermont, Jack Reed, D-Rhode Island, and Ed Markey, D-Massachusetts.

"Teachers and firefighters shouldn't be paying higher tax rates than the ultra-wealthy," said Whitehouse in a statement.  It's that simple. Our legislation will level the playing field by closing tax loopholes to ensure the highest earners pay their fair share in taxes."

The legislation is backed by over 100 organizations, including the AFL-CIO, the American Federation of Teachers, the American Federation of Government Employees, Americans for Tax Fairness, the National Organization of Women, the National Urban League, Oxfam America, Patriotic Millionaires, and more, who signed a joint letter of endorsement.