Introducing the Republican ‘Billionaires Pay Zero Tax’ Act

A new GOP bill, formally entitled the ‘Death Tax Repeal Act,’ would enable our super-rich to avoid both income and estate tax on their investment gains.

[Cross-posted from]

Under America’s current loophole-ridden tax law, rich people — even billionaires — can pass unlimited investment gains to their descendants without paying a dollar in income tax. These rich don’t even have to do any fancy planning. All they have to do is die, a step everyone, of course, takes eventually.

This particularly lush loophole comes from a tax law provision known as the “stepped-up basis rule,” and it works like this: Say Jeff Bezos died and left his Amazon shares, currently worth over $100 billion, to his kids. The Bezos kids would be treated under our income tax law as if they bought the shares for their value on the date of dad’s death. They could sell the shares at that value and pay no income tax.

But that doesn’t mean those kids would pay no tax at all. Dad’s estate would face an estate tax liability equal to 40 percent of the excess of the value of his estate, including the Amazon shares, over $13 million. Estate tax avoidance planners could, to be sure, help Mr. Bezos avoid much of that estate tax, possibly even all of it. But doing so likely would mean the kids couldn’t avoid income tax on his investment gains.

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