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capital gains
GOP 'Doubling Down on a Failed Agenda' With New Reconciliation Framework, Says Key Dem
"Americans will pay a steep price if Republicans move forward with this disastrous agenda," said Sen. Ron Wyden.
Jan 13, 2026
The House Republican Study Committee on Tuesday released a blueprint for a new budget reconciliation package with the purported goal of making "life more affordable for working families."
However, according to an analysis by Washington Post economic policy reporter Jacob Bogage, two of the three most expensive items in the GOP budget blueprint would be the elimination of the federal estate tax, which would provide a massive windfall to the richest US households, and indexing capital gains to inflation, which even the conservative American Enterprise Institute contends "would further distort taxpayer decisions and increase the ability to shelter income from taxation."
Other items in the GOP blueprint include refilling the Strategic Petroleum Reserve with oil seized from Venezuela, blocking federal funds for abortion providers, and a new "excise tax on colleges that allow trans women in sports."
Sen. Ron Wyden (D-Ore.), ranking member of the Senate Finance Committee, wasted no time ripping the proposal from the largest right-wing House caucus to pieces.
"After passing the largest health care cut in American history, Republicans are doubling down on a failed agenda that benefits billionaires and giant corporations while ripping away food, healthcare and other basic necessities,” Wyden said. “This legislation will eliminate protections for Americans with preexisting conditions, place more red tape between families and their healthcare, and seize ideological trophies instead of focusing on making life more affordable. Americans will pay a steep price if Republicans move forward with this disastrous agenda.”
Richard Phillips, pensions and tax policy director for Sen. Bernie Sanders (I-Vt.), marveled at the GOP loading up a bill supposedly focused on working families with massive giveaways to the wealthiest Americans.
"As part of it's new affordability agenda for the American people the Republican Study Committee reveals its plan to give the wealthiest 0.2% of estates a $281 billion tax break?" he wrote in a post on X.
Chuck Marr, vice president of federal tax policy at the Center on Budget and Policy Priorities, similarly called the GOP blueprint "tone deaf."
"Nothing says attack the affordability crisis working-class people face than Rs calling for eliminating the estate tax for the wealthiest heirs in the country—just months after giving them a $30 million tax free exemption," he wrote.
The GOP's second attempt at a budget reconciliation package comes months after it passed the One Big Beautiful Bill Act, a reconciliation package that gave more tax breaks to the rich, but cut Medicaid spending by nearly $1 trillion over the next decade, while also slashing spending on the Supplemental Nutrition Assistance Program by nearly $200 billion over the same period.
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America Needs To Tax Its Own 'Second Estate': Billionaires
The United States has no nobility, according to our Constitution. But our tax code does protect the very rich.
Dec 04, 2025
Pre-revolutionary French aristocrats—the “Second Estate”—didn’t pay taxes. Amazingly, America too has a second estate, billionaires who pay virtually no taxes. In her very outstanding recent book, law professor Ray D. Madoff shows how they get away with this.
The United States has no nobility, according to our Constitution. But our tax code does protect the very rich.
Federal taxes on income and estates—intended to fund government and prevent development of a hereditary financial aristocracy—were enacted early in the 20th century and originally worked well.
But since about 1980, the estate tax—infested with loopholes—has been nearly abolished for practical purposes and now produces trivial income.
Madoff wants to get rid of the ability of ultra-rich people—billionaires—to avoid having any taxable income in the first place.
Madoff suggests that the estate tax should be completely eliminated because its existence deceives the public about what is really going on. People falsely think that billionaires who pay no federal income tax will at least pay the estate tax when they die. In fact, they are paying neither kind of tax.
Billionaires avoid the income tax by arranging to have no taxable income.
Before 1982 ultra-rich people could not avoid paying income tax. Their income consisted of dividends and capital gains harvested by selling shares of stock, the price of which had increased. Dividends and capital gains are taxable income.
But in 1982 federal regulators weakened a rule prohibiting corporations from buying back their own stock. Since then, many corporations have used profits to buy back stock shares instead of issuing dividends. With fewer shares of stock outstanding and the value of the corporation increasing, the value of each share of stock began increasing dramatically.
What used to be taxable dividends turned into large capital gains benefiting the stock owners, including very rich ones. If shareholders need cash and sell appreciated stock, of course they would owe income taxes on the capital gains (selling price of the stock minus how much the shares cost them). But capital gains are taxed at a much lower rate than normal income like salaries, bank interest, and returns on bonds.
As Madoff points out, however, billionaires need not sell any stock to get cash to live on. Instead, they can borrow the money, using their stock as collateral. Borrowed money is not taxable income, so they owe no tax while living extravagantly.
And when they die, the stock they bequest to their heirs gets a stepped up “basis,” so if their heirs sell the stock they will owe no taxes because the stepped up basis leaves no taxable capital gains.
And inherited money is not considered taxable income. Someone who earns $50,000 pays significant income (and payroll) taxes on it, while someone who inherits $1 billion pays no income or payroll tax on it.
Madoff rightly objects to this situation, but she is not arguing that we should “soak the rich” with higher income tax rates at the top. She points out that there are two kinds of “rich” people. One is the working rich, skilled professionals earning high salaries and, usually, already paying very high taxes. A high percentage of all income tax receipts come from these people.
Increasing the high tax rates these “rich” people are already paying would produce insignificant extra revenue for the government.
Instead, Madoff wants to get rid of the ability of ultra-rich people—billionaires—to avoid having any taxable income in the first place. She wouldn’t tax them while they are alive, but would tax whoever inherits from them.
Rather than trying to fix the estate tax, Madoff would abolish it, eliminate the stepped up basis for inherited stock, and make inherited money and other gifts received taxable income for the recipients.
Assuming an exemption for small gifts (to allow birthday presents and the like), this could be a reasonable reform. It would bring in very large amounts of taxes while reducing today’s extreme economic inequality.
For further details, see Ray D. Madoff, The Second Estate: How The Tax Code Made An American Aristocracy. This is one of the two best books I have read since retiring in 2000.
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The Ultra-Rich Have Exploited Our Tax System Long Enough—Make Them Pay!
Funny how these same apologists for our richest don’t have much sympathy for ordinary Americans who lack the “wherewithal” to pay for medical care, adequate housing, and other necessities.
Mar 30, 2025
The most gaping loophole in our tax law? The tax-free compounding of gains on investments.
This classic loophole enables the two most lucrative inequality-driving income tax avoidance strategies. The first, buy-borrow-die, allows wealthy Americans to avoid income tax entirely on even billions in investment gains.
These wealthy need only hold on to their appreciated assets until death. What if they need cash before then? They merely borrow against the appreciated assets, typically at very low interest rates.
Are rich Americans, including billionaires, truly unable to pay tax on their investment gains before they sell the assets yielding those gains? Wanna buy a bridge?
The second avoidance strategy, buy-hold for decades-sell, lets wealthy investors pay a super low effective annual tax rate on investments that appreciate at high rates over long periods of time. These investors typically experience decades of compounding gains without taxation.
The effective tax rates involved in this second strategy won’t reach buy-borrow-die’s zero tax, but may in some cases get as low as a 4% effective annual rate. A 4% effective annual tax rate would have an investment with a pre-tax growth rate of 20% per year enjoying an after-tax growth rate of 19.2% per year.
Congressional apologists for the ultra-rich on both sides of the aisle regularly claim that their wealthy patrons should be entitled to endless tax-free compounding of investment gains. Without this tax-free compounding, the argument goes, our richest wouldn’t have the “wherewithal to pay” tax on their investment gains before their assets get sold. U.S. Sen. Ron Johnson (R-Wis.) invoked this tired canard at a recent Senate Finance Committee hearing.
Funny how these same apologists for our richest don’t have much sympathy for ordinary Americans who lack the “wherewithal” to pay for medical care, adequate housing, and other necessities. Average wage earners, under current law, can’t even wait until year-end to pay Uncle Sam their taxes. Those taxes come out of each paycheck, wherewithal to pay or not.
Are rich Americans, including billionaires, truly unable to pay tax on their investment gains before they sell the assets yielding those gains? Wanna buy a bridge?
Let’s start with the easiest case: a publicly traded investment that can be sold in smaller units, an investment in stocks, for instance. Say Rich, a wealthy investor, buys 1 million shares of Nvidia at $100 per share, and those shares, by year’s end, increase in value to $120 per share.
Our investor Rich now has a $20 million gain. If that annual gain faced a 25% tax rate, Rich would have a $5 million tax liability. To raise the cash to pay that tax, Rich could sell off 41,667 of his shares, leaving him with 958,333 shares, now worth just under $115 million.
That doesn’t seem very painful.
Now, let’s say Rich didn’t want to sell any shares. He could instead just borrow $5 million against the shares to pay the tax.
Or what if Rich had bought a parcel of land instead of Nvidia shares and, for whatever reason, having him borrow to pay tax on his annual investment gains didn’t turn out to be feasible?
Still no problem for Rich. For gains on illiquid assets, Rich could defer the payment of tax until he sold the assets, but the tax could be computed as if it accrued annually. How might this work? Say, for example, that Rich’s $100 million parcel of land grew at an annual rate of 10% for 20 years, at which point he sold it at its appreciated value of $672,749,995.
Had Rich paid tax at 25% on his gain each year, his rate of return would have been 7.5% per year, and after 20 years his investment would be worth $424,785,110.
The $247,964,885 difference between his sale price and the value of his investment with its actual rate of return reduced by the tax paid would be his tax liability upon sale. Payment of that amount would leave Rich with the same sum, $424,785,110, had he been able to sell a small share of his parcel each year, to pay the tax on his investment gain.
Put another way, Rich would be left with the same amount using this tax computation as he would if he sold his parcel each year, paid tax on the gain, and reinvested the remaining proceeds in another parcel.
And if Rich died before selling his parcel? His income tax could be determined for the year of his death in the same fashion as if he’d sold the parcel for its fair market value at the time of his death. Or, in the alternative, his inheritors could step into his shoes and pay the same tax when they sold the parcel as Rich would have had he survived and sold it at that time.
The bottom line: If we closed the tax-free compounding of investment gains loophole, some situations might exist where the immediate payment of tax on investment gains could pose a problem. But we can address those situations by deferring payment of the tax until investments get sold and accounting for the tax-free compounding in the determination of the tax.
These problematic situations, in other words, don’t justify leaving a gaping loophole in place.
So the obstacle to shutting down buy-borrow-die and buy-hold for decades-sell has absolutely nothing to do with ultra-rich investors lacking the wherewithal to pay taxes. That obstacle remains the politicians in Washington, D.C. who lack the wherewithal to summon the courage to make our rich pay the taxes they owe our nation.
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