In November, Sen. Ron Wyden (D-Ore.), chair of the Senate Finance Committee,  introduced the Billionaires Income Tax Act, legislation to to combat an estate planning strategy used by billionaires known as "buy, borrow, die," and ensure they start paying their fair share in taxes, Accounting Today reported.

The committee held a hearing about the issue, titled "Examining How the Tax Code Affects High-Income Individuals and Tax Planning Strategies,"on Nov. 9, 2023.

The strategy works as follows, Wyden said at the time: "A corporate raider buys a business, and then borrows against its growing untaxed value to fund their extravagant lifestyle,” he said. Everything from superyachts to luxurious vacations, expensive art deals—you name it. It goes up and up in value all while not paying a dime in tax. And when they die, their assets are passed to their kids, often entirely tax-free—and the cycle continues."

Wyden contrasted this strategy with the tax system that operates for a "nurse or a firefighter who is required to pay taxes out of each paycheck. Working people don't get to play by the same rules as billionaires. They don't get to call up an accountant every time they don't feel like paying taxes."

Fifteen senators joined Wyden in support for the bill, which would cover only taxpayers with more than $100 million in annual income or more than $1 billion in assets for three consecutive years  The legislation, as laid out in a summary, would provide that "[t]radable assets (like stocks that are easily valued on an annual basis) owned by billionaires will be marked to market each year. This means that billionaires will pay tax on gains or take deductions for losses, whether or not they sell the asset. Taxpayers would be able to carry back their losses for up to three years in certain circumstances." 

The buy, borrow, die strategy works because of the step-up in basis at death, said Andrew Wilford, senior policy analyst at the National Taxpayers Union Foundation, in an interview with Accounting Today. When the taxpayer dies, the cost basis of an asset gets stepped up to its value at the date of death.  

“The Senate hearing focused heavily on Wyden's proposal on mark to market, where stock holdings are taxed whether or not gain is actually realized," Wilford said.  "Wyden is looking at the result, but not at the reason as to why the problem exists in the first place. There are valid reasons for business owners to borrow against assets. Just because a business owner is taking out a line of credit doesn't mean they are engaging in tax avoidance. So if you're an entrepreneur and start a business and it grows rapidly, you may simply need additional capital just to meet business needs."

"As Congress deliberates on addressing tax loopholes and fairness issues, we believe it is important to avoid solutions that could exacerbate existing problems," Wilford added.