Full Breakdown
California Governor Calls for End to “Buy, Borrow, Die” Loophole and National Billionaire Tax
7/2/2026, 4:28:17 AM
Newsom’s Call to Close the “Buy, Borrow, Die” Loophole
California Governor Gavin Newsom urged Congress to close the “buy, borrow, die” loophole, calling it a “tax-free lifestyle loan” that benefits the ultra-rich. He said a federal billionaire tax would curb wealth concentration more effectively than state-level measures that risk prompting high-net-worth residents to leave.
How the Strategy Works
The “buy, borrow, die” method has three steps: (1) purchase appreciating assets such as stocks, real estate or art; (2) borrow against those assets to fund consumption, which is not taxable; (3) transfer assets at death with a stepped-up basis that erases prior capital-gains tax. Elon Musk has been cited as a user.
Wealth Data and Tax Proposals
The United States now has 905 billionaires with a combined $7.8 trillion net worth (Institute for Policy Studies). The Tax Policy Center estimates the “buy, borrow, die” approach accounts for only 1 %–2 % of the economic income of the top 1 % of households. California has proposed a 5 % tax on billionaire assets. Senator Elizabeth Warren’s federal bill would levy a 2 % annual net-worth tax on holdings above $50 million, add a 1 % surcharge on billionaires, and impose a 40 % exit tax on expatriating individuals, projected to raise $6.2 trillion over ten years (UC Berkeley economists Saez and Zucman).
Official Statements & Responses
Newsom’s Substack post framed the loophole as a private tax code that shields only the richest and urged a billionaire tax. Warren’s bill targets unrealized gains but faces constitutional concerns. California lawmakers warn that a state-level billionaire tax could trigger capital flight, reinforcing Newsom’s call for federal action.
Criticism & Conflicting Views
Adam Michel of the Cato Institute says the “buy, borrow, die” narrative is unsupported, noting the super-rich often consume less than their taxable income and need not borrow. University of Michigan professor Edward Fox and Yale’s Zachary Liscow argue the dominant wealth-building strategy is holding assets to let unrealized gains compound, not borrowing. Their view clashes with Newsom’s claim of a major loophole; the Tax Policy Center estimates the strategy contributes only 1 %–2 % of top-1 % household income, and data on its use are scarce.
Verbatim Quotes
- “The wealthy have their own private tax code full of loopholes and exemptions that most people have never heard of, and they're counting on politicians in Washington to maintain it and keep quiet,” — Gavin Newsom, Governor of California
- “It is time for a national billionaires' tax.” — Gavin Newsom
- “The 'billionaires exploit buy-borrow-die more than anyone else' narrative isn't well supported,” — Adam Michel, Director, Tax Policy Studies, Cato Institute
- “Pushing up ordinary and capital-gains rates on those top earners would collect serious money without requiring Congress to design a constitutionally contested wealth tax or a mark-to-market regime for illiquid assets,” — Zachary Liscow, Yale law professor
What’s Next
Congress will debate Warren’s wealth-tax proposal while legal challenges loom; California’s 5 % billionaire tax remains under legislative review.
