Tax Billionaires' Real Income

Taxing Billionaires’ Real Income Billionaires pay a much lower effective tax rate than the rest of us, and capital gains having a lower rate than wages is nowhere near the most significant reason. Billionaires can live lavishly without ever selling their assets or paying income tax on their increases in wealth. They do this by borrowing against appreciated assets without triggering a taxable event. This loophole gives them cash for personal use while avoiding the tax burdens that ordinary Americans face when they earn wages or sell stock. As explained in David G. Chamberlain’s recent article, Borrowing as Realization: Taxing Billionaires’ Unlocked Gains (Buffalo Law Review, Vol. 73, 2025), this strategy exploits two principles of our federal income tax system: 1. The realization requirement taxes gains only when an asset is sold or exchanged. 2. Borrowed funds are excluded from income, based on the idea that loans must be repaid and therefore don’t represent true increases in wealth. But when billionaires use appreciated property as collateral to borrow millions — or even billions — they are clearly monetizing their wealth. The cash they receive is real, spendable, and often never repaid in their lifetimes. This is not theoretical — it’s the foundation of the “Buy, Borrow, Die” strategy. It’s time for Congress to act. Recommendations: • Amend the Internal Revenue Code to treat borrowing against substantial asset appreciation as taxable events. This would apply only when borrowed funds are secured by appreciated property. • Target ultra-wealthy taxpayers, not middle-class homeowners. The legislation should include thresholds to ensure that only high-net-worth individuals are affected. • Preserve fairness and simplicity by recognizing that if someone can spend what they receive, they should be taxed on it. This reform would not require a wealth tax or a full current market evaluation regime. It would simply close a loophole that allows the richest Americans to live tax-free while the rest of us pay on every paycheck. As Professor Chamberlain persuasively argues, taxing borrowing on appreciation is constitutional, practical, and fair. It’s time to restore integrity to our tax system and ensure that billionaires contribute their share.