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politics12h ago
California’s wealth tax doesn’t fix the real problem: Cash-poor billionaires who borrow money, tax-free, to live on
- California weighs a one‑time 5% wealth tax on residents worth $1 billion or more, aiming to raise about $100 billion.
- Critics say the plan misses how the ultrawealthy generate cash through asset‑backed borrowing rather than realizing income.
- Experts say borrowing avoids income taxes because loan proceeds are not treated as income.
- The so‑called ‘buy, borrow, die’ strategy helps heirs inherit assets with stepped‑up basis, erasing embedded tax liability.
- California watchdogs warn a one‑time levy may not curb ongoing cash flows from asset‑backed borrowing.
- Supporters say the measure could raise funds to backfill federal healthcare cuts.
- Governorsaid the levy could spur out‑of‑state migration among high‑net‑worth residents.
- Experts propose broader reforms to tax wealth proceeds or treat borrowing as income to close the loophole.
- Venture capitalists note some billionaires have already relocated from California over tax fights.
- Fortune reporters used generative AI as a research tool with editor verification for accuracy.
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