Congressman Dan Goldman introduced an initiative targeting the ultra-wealthy, calling it the ‘Robinhood’ Act, openly targeting Tesla CEO Elon Musk and Amazon co-founder Jeff Bezos.

Tax-free billionaires?

Goldman unveiled the Redistribution of Billions by Instituting New High-Income Obligations on Overlooked Debt (ROBINHOOD) Act, a new federal tax aimed at the ultra-wealthy. The legislation seeks to eliminate a major loophole in the US tax system, which allows billionaires to borrow against assets without paying income tax, generating massive sums while keeping their effective tax rates extremely low.Goldman said that an average New Yorker lives paycheck to paycheck while billionaires hoard large amounts of money. “While working, wage-earning New Yorkers pay income taxes on every single paycheck, billionaires live tax-free by borrowing against their stock portfolios, real estate holdings, and art collections without paying a dime in taxes on that money.”Furthermore, the Congressman claimed that the new bill will generate billions for childcare and working families: “By restoring basic fairness to our tax code and making the ultra-wealthy pay their fair share and contribute what they owe, this bill will generate hundreds of billions of dollars to invest in universal pre-K, child care, and working families instead of subsidising billionaires’ yachts and private islands. It’s long past time for the wealthiest people in the country to pay their fair share.”

The numbers involved in the act

The ROBINHOOD Act proposes a 20% excise tax on loans and lines of credit backed by capital assets for individuals earning over $400,000 a year, or $450,000 for joint filers. The tax would apply to personal financial investments including stocks, bonds, private equity, real estate, digital assets, and collectibles, while exempting home mortgages, home equity loans, and farmland credit. The bill could generate at least $276 billion over 10 years, according to Goldman

How billionaires exploit tax loopholes

A 2021 ProPublica investigation showed that America’s 25 richest individuals paid an average effective tax rate of just 3.4%, far below the top federal income tax bracket. Elon Musk paid 3.3%, Jeff Bezos 1%, and Warren Buffett just 0.1%.One common strategy called the “Borrow, Buy, Die” allows the ultra-wealthy to borrow against appreciating assets rather than sell them and pay capital gains tax. In 2022, Elon Musk had pledged $94 billion in Tesla shares as collateral for personal loans, while the next richest 1% collectively borrowed over $1 trillion in the same year.