Jay Soled and collaborators propose ending arcane tax benefit for the wealthy in The Hill
What do the three wealthiest entrepreneurs in the United States — Bill Gates, Jeff Bezos, and Warren Buffett — have in common? Likely, not a single penny of income tax will be paid on their appreciated stock. Ever.
How is this possible? An anachronistic Tax Code section, commonly known as the "step-up in basis" rule, provides that an asset's tax basis (a.k.a. its cost) is made equal to its fair market value at the owner's death. After a basis step-up, an asset can be immediately sold by a taxpayer's heirs without triggering income tax on any capital gains from the sale proceeds.
The revenue loss from this arcane tax rule is enormous.
Because the rule constitutes a significant departure from the principle that all income should be taxed at least once, legislators have twice tried to eliminate it.