Abolish the Estate Tax to Finally Tax Billionaires

For most of us in California, the lead-up to April 15 is a familiar ritual of dread, spreadsheets, and calculating exactly how much of our hard-earned paycheck is heading back to the government. Whether you’re a freelance designer working out of a coffee shop in San Francisco or a ride-share driver navigating the congested lanes of the 405 in Los Angeles, the math is straightforward: if you made money, you owe taxes. But there is a glaring, systemic asymmetry at play here. While a California Uber driver earning $60,000 might uncover themselves owing nearly $15,000 in taxes, some of the wealthiest individuals in the world—people whose names are synonymous with the tech and finance hubs of our state—operate under a completely different set of rules.

The Billionaire’s Playbook: Why Salaries Are for the Middle Class

It seems counterintuitive, but in the world of ultra-high-net-worth individuals, a high salary is actually a liability. The current tax structure heavily burdens those who earn a traditional wage. For instance, a Californian pulling in a $10 million salary would face a combined federal and state tax bill exceeding $5 million. To avoid this, the “ultra-rich” have perfected a three-step avoidance strategy that effectively removes them from the income-tax system that the rest of us inhabit.

The first step is the “low-salary” maneuver. We’ve seen this with figures like Jeff Bezos, who set his salary at $82,000—a figure low enough to actually make him eligible for the child tax credit. Others, like Mark Zuckerberg and Larry Ellison, have famously operated as “$1-a-year” men. By eschewing a traditional paycheck, they shift their financial growth into stock value. Between 2023 and 2026, the growth of these assets has been astronomical. Elon Musk’s wealth increased by $500 billion, and Zuckerberg’s by over $150 billion. Because these gains are realized as capital gains rather than income, the maximum tax rate drops to 23.8% (including the net-investment-income tax), provided they actually sell the stock.

The “Buy, Borrow, Die” Strategy and the SEC’s Role

The second step of the playbook is even more effective: avoiding the sale of assets entirely. By using their stock as collateral for loans, the wealthy can fund a lavish lifestyle without ever triggering a taxable event. This allows them to enjoy the benefits of their wealth while deferring taxes indefinitely. This loophole was widened significantly by a 1982 Securities and Exchange Commission (SEC) rule change. Before this, companies primarily shared profits via dividends, which were taxed at rates similar to salaries. The SEC’s shift toward allowing stock buybacks created a “safe harbor” that boosted stock prices, making tax payments optional for shareholders who simply held onto their shares.

This cycle of wealth accumulation is further protected by the third step: inheritance. Under current rules, inheriting $10 million or even $100 billion does not require the recipient to report it on an income-tax return. While the estate tax was designed to address this, it has been largely neutralized by lobbying efforts from the wealthiest families and a series of loopholes that have rendered it functionally nonexistent since 1990, despite remaining on the books.

Rethinking the System: From Estate Taxes to Inheritance Income

There is a growing debate over how to fix this. While some politicians propose new wealth taxes, others argue that such measures are tricky to administer and potentially unconstitutional. A more streamlined alternative involves a complete pivot: abolishing the estate tax entirely and bringing inheritances back into the income-tax system. This would mirror a system that has functioned in Canada for decades.

Under this proposed model, taxes would be triggered whenever property is transferred—whether through a sale, a gift, or at death. Instead of taxing the assets of a deceased person (the “death tax” narrative), the tax would be levied on the person receiving the wealth, treating it as taxable income. To ensure fairness, the system could include exclusions for spouses, healthcare, and education, and allow a significant tax-free threshold—perhaps $1 million or $2 million—before ordinary income-tax rates apply. This shift would not only benefit the federal government but would also provide a boost to states like California, which often employ federal definitions of taxable income as the baseline for their own state tax rules.

By integrating modern tax planning strategies with a more coherent legal framework, the goal is to move away from a “jumble of rules” and toward a system where the wealthy pay based on the actual profits they earn and the income they acquire.

Navigating Wealth Transfers in California

Given my background as an Executive Geo-Journalist and pundit focusing on economic structures, I’ve seen how these macro-level tax shifts create immense anxiety for families and business owners in California. If you are managing significant assets or planning a generational transfer of wealth, the complexity of the current “buy, borrow, die” era requires specialized guidance. You shouldn’t just appear for a general accountant; you need professionals who understand the intersection of federal mandates and California’s unique tax environment.

Depending on your situation, here are the three types of local professionals you should prioritize:

Estate Planning Attorneys

Look for practitioners who specialize in “intergenerational wealth transfer” rather than simple will-writing. They should have a proven track record of navigating the current estate tax loopholes and be able to model how a shift toward an inheritance-based income tax would impact your specific portfolio.

Certified Public Accountants (CPAs) specializing in High-Net-Worth Individuals

You need a CPA who understands the nuances of capital gains, net-investment-income tax, and the specific implications of stock buybacks. Ensure they have experience with “collateralized lending” strategies so you can understand the risks associated with borrowing against assets to avoid income triggers.

Tax Strategists and Wealth Managers

Seek out advisors who focus on “tax-efficient growth.” The right professional will not just tell you how to save money today, but will provide a long-term roadmap that accounts for potential legislative shifts, such as the movement to abolish estate taxes in favor of income-based inheritance taxes.

Ready to find trusted professionals? Browse our complete directory of top-rated tax professionals in the california area today.