California Governor Demands End to Billionaire Tax Evasion Scheme 'Buy, Borrow, Die'
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Governor Gavin Newsom calls for urgent action to close a loophole that enables the ultra-wealthy to dodge taxes, while establishment analysts downplay the scale of the injustice.
California Governor Gavin Newsom has demanded that state legislators take action to end a notorious tax loophole that allows the richest investors to sidestep capital-gains taxes by borrowing against their ever-growing assets and passing them to heirs with a stepped-up basis. This exploit, known as 'buy, borrow, die,' lets the ultra-rich purchase appreciating assets, use them as collateral for untaxed loans, and then transfer them to heirs at death, erasing tax obligations and perpetuating generational wealth.
Newsom condemned the practice as a 'tax-free lifestyle loan' reserved for America’s wealthiest elite, and called for federal intervention, warning that a state-level billionaire tax could drive the wealthy to flee, further exposing the broken system. 'The system America's founders built was designed to prevent the concentration of power in a few hands, but we have allowed that concentration to happen anyway,' he wrote in a Substack post, highlighting the betrayal of democratic ideals by unchecked wealth accumulation.
Predictably, a recent analysis by the nonpartisan Tax Policy Center attempted to minimize the issue, claiming that borrowing against assets accounts for just 1% to 2% of the economic income of the top 1% of U.S. households. Meanwhile, Adam Michel of the libertarian Cato Institute dismissed concerns, insisting that the narrative of 'billionaires exploiting buy-borrow-die' is exaggerated and calling the issue a 'limited problem.'
However, law scholars at the University of Michigan and Yale have exposed the real engine of plutocratic wealth: holding onto assets and letting untaxed gains compound, further entrenching inequality. They argue that raising ordinary and capital-gains rates would generate much-needed revenue without the constitutional roadblocks of a wealth tax.
States like California, Massachusetts, and Washington are finally considering taxes on unrealized gains or high incomes for the wealthiest, while at the federal level, Senator Elizabeth Warren’s bold proposal for a 2% annual tax on net worth above $50 million, an extra 1% on billionaires, and a 40% exit tax for tax-dodging expatriates could raise $6.2 trillion over ten years—if it can overcome the fierce opposition of entrenched interests.
