George Hahn

Finding flaws in wealth taxes is easier than coming up with solutions, but there are common sense ideas we should adopt.

One is tackling the carried interest loophole, which allows private equity and venture capital managers to be taxed at the capital gains rate of 20%, well below the top rate of 37% for ordinary income.

Taxing carried interest as ordinary income could raise about $15 billion over the next 10 years.

That's not a game changer, but it's a start.

Capital isn't more noble than sweat.

There's no reason someone should pay a 37% tax on their income while the wealthy pay much less when they sell stocks.

In 2021, income from capital gains accounted for 39% of pre-tax income for the top 1%, compared with less than 1% for those in the bottom three quintiles.

If you want to climb into the upper echelons, follow a three-step strategy.

Buy, borrow, die.

While wages are taxed when they're earned, assets are taxed when they're sold.

The wealthy often borrow against stock holdings and other assets, which grow more valuable over time rather than selling them, deferring their tax liability.

As long as interest rates are lower than the rate of return on the assets they hold, billionaires can spend more on houses, yachts, or even islands while enjoying significant wealth appreciation.

In 2011, a year in which Jeff Bezos was worth $18 billion, he reported so little income that he received a $4,000 child tax credit.

Americans with more than $100 million of wealth held an estimated $8.5 trillion in unrealized capital gains in 2022.

One idea.

When the rich borrow and use their assets as collateral, they should pay tax on the difference in the value of that stock or property between when they originally bought it and the day it's pledged.

Treating borrowing as a taxable event could raise more than $100 billion over a decade.

A hobbled IRS is a massive tax cut for rich individuals and large corporations, amounting to the most regressive tax in recent history.

Auditing lower and middle income tax returns is easy.

Holding wealthy taxpayers with high-priced lawyers accountable requires a lot more resources.