Fair Share Minimum Tax Bill

At a Glance

  • Sets a 25% minimum tax on total economic income above $25 million
  • Taxes unrealized gains on publicly traded assets and asset-backed borrowing
  • Eliminates the stepped-up basis that erases capital gains at death
  • Reduces minimum rate to 15% for creating good jobs and funding education
  • Closes the "buy, borrow, die" strategy used to avoid taxes on wealth
Fair Share Minimum Tax Bill

The American tax system is built on the principle that those who earn more should contribute proportionally more to the public institutions and infrastructure that enable their success. In practice, this principle has broken down at the very top of the income scale. While most working Americans pay effective federal tax rates of 20 to 30 percent[1], many of the wealthiest individuals in the country pay effective rates in the single digits—and in some cases pay nothing at all[2].

This is not the result of illegal tax evasion. It is the predictable outcome of a tax code that taxes wages and salaries at full rates while providing preferential treatment to investment income, allows unlimited deferral of gains on appreciated assets, permits taxpayers to borrow against vast wealth without triggering a taxable event, and erases all accumulated gains at death through the stepped-up basis. Taken together, these provisions create a parallel tax system in which the wealthiest Americans can access and enjoy their wealth while reporting little or no taxable income[3]. The result is that a teacher, a firefighter, or a small business owner pays a higher effective tax rate than a billionaire.

This legislation establishes a minimum effective tax rate of 25 percent on total economic income—broadly defined to include unrealized gains on publicly traded assets and loan proceeds drawn against appreciated property—for any taxpayer whose total economic income exceeds $25 million in a taxable year. Critically, the bill also rewards taxpayers who contribute to economic growth and workforce development: the minimum rate may be reduced to as low as 15 percent through credits for net new job creation that meets rigorous compensation and benefits standards, and for direct investment in higher education for workers and their families. The stepped-up basis at death is eliminated so that accumulated gains are eventually taxed rather than disappearing between generations.

The goal is not punitive taxation. It is simple fairness: no American who earns more than $25 million in a year should pay a lower effective tax rate than the working families whose labor, consumption, and civic participation sustain the economy. Those who use their wealth to create good jobs and invest in education should be rewarded with meaningful tax relief. Those who do not should pay their fair share.

Problems the Bill Aims to Solve

The Ultra-Wealthy Pay Lower Effective Tax Rates Than Working Families. The federal tax code's preferential treatment of capital gains, combined with unlimited deferral of unrealized gains, allows individuals with tens of billions in wealth to report effective federal tax rates far below those paid by middle-income wage earners[1]. This undermines public confidence in the fairness of the tax system and shifts the burden of funding public services onto those least able to bear it.

The "Buy, Borrow, Die" Strategy Eliminates Taxation on Vast Wealth. Ultra-wealthy individuals accumulate appreciated assets, borrow against those assets to fund consumption and investment, and hold the assets until death when the stepped-up basis erases all accumulated gains. At no point in this cycle is income tax paid on the appreciation that constitutes the bulk of their economic income. This is not a loophole—it is a deliberate strategy enabled by the structure of the tax code, and it is available only to those with sufficient wealth to employ it.

Unrealized Gains Are Economically Indistinguishable from Income. When a taxpayer's publicly traded portfolio increases by $500 million in a year, that gain is as real and as accessible as $500 million in wages—it can be borrowed against, pledged as collateral, used to secure lines of credit, and converted to cash at any time. The decision not to sell is a tax planning choice, not a reflection of economic reality. The current system rewards that choice with indefinite deferral.

The Stepped-Up Basis Erases Generational Tax Obligations. When appreciated assets pass to heirs at death, the cost basis resets to fair market value, permanently eliminating the tax on all gains accumulated during the decedent's lifetime[4]. This creates a powerful incentive to hold assets until death rather than sell them, and it ensures that the wealthiest dynasties can pass vast fortunes from generation to generation without ever paying tax on the appreciation.

Tax Policy Should Reward Economic Contribution. Wealthy individuals who use their resources to create high-quality jobs and invest in education make direct contributions to economic growth and social mobility. The tax code should distinguish between wealth that is productively deployed—creating employment, funding workforce development, and expanding opportunity—and wealth that is passively accumulated. A minimum tax with meaningful incentive credits accomplishes this distinction.

Fair Share Minimum Tax Act

120th Congress, 2nd Session

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

Sec. 1. SHORT TITLE.

This Act may be cited as the "Fair Share Minimum Tax Act."

Sec. 2. DEFINITIONS.

For purposes of this Act—

  1. (1) COVERED TAXPAYER.—The term "covered taxpayer" means any individual whose total economic income for the taxable year exceeds $25,000,000. For married individuals filing jointly, the threshold shall apply to the combined total economic income of both spouses.
  2. (2) TOTAL ECONOMIC INCOME.—The term "total economic income" means the sum of—
    1. (a) adjusted gross income as defined under section 62 of the Internal Revenue Code of 1986;
    2. (b) net unrealized gains on tradable assets as determined under Section 4;
    3. (c) imputed income from covered asset-backed borrowing as determined under Section 5; and
    4. (d) any other item of economic benefit that increases the taxpayer's net worth or funds the taxpayer's consumption, as determined by the Secretary of the Treasury by regulation.
  3. (3) TRADABLE ASSET.—The term "tradable asset" means any asset for which a readily ascertainable fair market value exists, including publicly traded securities, exchange-traded options and futures, publicly traded partnership interests, and any other asset regularly traded on an established securities market.
  4. (4) ILLIQUID ASSET.—The term "illiquid asset" means any asset that is not a tradable asset, including interests in private businesses, closely held corporations, real property, art, collectibles, and other assets for which a readily ascertainable fair market value does not exist.
  5. (5) COVERED ASSET-BACKED BORROWING.—The term "covered asset-backed borrowing" means the aggregate amount of loan proceeds received by a covered taxpayer during the taxable year that are secured in whole or in part by appreciated assets, to the extent that the aggregate amount of such borrowing exceeds $1,000,000 for the taxable year. The term includes refinancing, renewal, or rollover of any such loan.
  6. (6) APPRECIATED ASSET.—The term "appreciated asset" means any asset held by the taxpayer whose fair market value exceeds the taxpayer's adjusted basis in such asset.
  7. (7) QUALIFYING POSITION.—The term "qualifying position" means a full-time position of not fewer than 30 hours per week that—
    1. (a) provides total compensation equal to or exceeding 150 percent of the area median income for the metropolitan or nonmetropolitan statistical area in which the position is located, as published annually by the Department of Housing and Urban Development;
    2. (b) includes employer-sponsored health coverage that meets the essential health benefits requirements under section 1302 of the Patient Protection and Affordable Care Act; and
    3. (c) includes an employer contribution to a qualified retirement plan of not less than 3 percent of the employee's base salary.
  8. (8) TOTAL COMPENSATION.—The term "total compensation" means the aggregate value of all remuneration provided to an employee, including base salary or wages, employer-paid health insurance premiums, employer retirement contributions, employer-paid life and disability insurance, paid leave (including vacation, sick leave, family leave, and parental leave), tuition assistance or reimbursement, and any other benefit with a quantifiable monetary value provided as a condition of employment.
  9. (9) NET NEW QUALIFYING POSITIONS.—The term "net new qualifying positions" means the number of qualifying positions maintained by the taxpayer or any entity in which the taxpayer holds a controlling interest at the end of the taxable year, minus the highest number of qualifying positions maintained at the end of any of the three immediately preceding taxable years. Positions eliminated and replaced within the same taxable year shall not be counted as net new. For purposes of this paragraph, positions transferred between entities controlled by the same taxpayer shall not be counted as net new, and a reduction in qualifying positions in one entity may not be offset by creation of positions in another entity to generate credits—the calculation shall be performed on an aggregate basis across all entities in which the taxpayer holds a controlling interest.
  10. (10) QUALIFIED EDUCATION EXPENDITURE.—The term "qualified education expenditure" means a direct payment made by a covered taxpayer for tuition, mandatory fees, books, supplies, and reasonable room and board at an accredited institution of higher education on behalf of—
    1. (a) an employee of the taxpayer or of any entity in which the taxpayer holds a controlling interest;
    2. (b) a dependent of such an employee; or
    3. (c) a contribution to a scholarship fund administered by an accredited institution of higher education, provided that the fund awards scholarships on the basis of merit, financial need, or both, and that the taxpayer does not control the selection of individual recipients.

For purposes of subparagraph (c), a contribution shall not be treated as a qualified education expenditure if (i) the covered taxpayer, or any person related to the taxpayer within the meaning of section 267(b) of the Internal Revenue Code, serves on the governing board of the institution administering the fund; (ii) more than 10 percent of the fund's recipients in any academic year are employees, dependents of employees, or business associates of the taxpayer or any entity in which the taxpayer holds a controlling interest; or (iii) the taxpayer or any related person receives any direct or indirect benefit from the institution in connection with the contribution, other than the tax credit provided under this Act.

Sec. 3. MINIMUM EFFECTIVE TAX RATE.

  1. (1) IMPOSITION.—In addition to any other tax imposed by the Internal Revenue Code of 1986, a covered taxpayer shall owe a minimum tax for each taxable year equal to the excess, if any, of—
    1. (a) 25 percent of the taxpayer's total economic income for the taxable year; over
    2. (b) the sum of all federal income taxes otherwise imposed on the taxpayer for such taxable year (including taxes on capital gains, self-employment taxes, and the net investment income tax), reduced by the incentive credits allowed under Section 8.
  2. (2) INCENTIVE-ADJUSTED FLOOR.—In no event shall the total federal income tax liability of a covered taxpayer, after application of incentive credits under Section 8, be less than 15 percent of the taxpayer's total economic income for the taxable year.
  3. (3) INFLATION ADJUSTMENT.—Beginning in the second calendar year after the date of enactment, the $25,000,000 threshold under Section 2(1) shall be adjusted annually for inflation using the Chained Consumer Price Index for All Urban Consumers, rounded to the nearest $100,000.

Sec. 4. INCLUSION OF UNREALIZED GAINS IN TOTAL ECONOMIC INCOME.

  1. (1) TRADABLE ASSETS.—A covered taxpayer shall include in total economic income for each taxable year the net unrealized gain on all tradable assets, determined by marking such assets to fair market value as of the last business day of the taxable year, minus the taxpayer's adjusted basis in such assets.
  2. (2) LOSS CARRYFORWARD.—If the mark-to-market valuation under paragraph (1) results in a net unrealized loss for the taxable year, such loss may be carried forward to offset net unrealized gains in subsequent taxable years, but may not reduce total economic income below the amount that would be determined without regard to this section.
  3. (3) CREDIT FOR TAXES PAID ON UNREALIZED GAINS.—Upon the subsequent disposition of an asset on which tax was paid under this section, the taxpayer shall receive a credit against tax otherwise due equal to the tax attributable to the previously included unrealized gain, to prevent double taxation.
  4. (4) ILLIQUID ASSETS—DEFERRED RECOGNITION.—Unrealized gains on illiquid assets shall not be included in total economic income annually but shall be recognized upon—
    1. (a) disposition of the asset by sale, exchange, gift, or other transfer;
    2. (b) the death of the taxpayer, as provided in Section 6; or
    3. (c) a determination by the Secretary that the asset has become a tradable asset.
  5. (5) INTEREST CHARGE ON DEFERRED ILLIQUID GAINS.—Upon recognition of gain on an illiquid asset under paragraph (4), an interest charge shall be imposed on the deferred tax amount at the applicable federal short-term rate plus 3 percentage points, compounded annually from the date on which the gain would have been recognized had the asset been a tradable asset.
  6. (6) CHARITABLE VEHICLE ANTI-ABUSE RULE.—If a covered taxpayer contributes appreciated assets to a charitable remainder trust, charitable lead trust, donor-advised fund, or private foundation—
    1. (a) the contribution shall be treated as a disposition for purposes of this Act, and the taxpayer shall include in total economic income for the taxable year the net unrealized gain on the contributed assets as of the date of contribution;
    2. (b) income received by the taxpayer from a charitable remainder trust or similar arrangement funded with appreciated assets shall be included in total economic income; and
    3. (c) no charitable deduction attributable to the contribution of appreciated assets shall reduce total economic income below the minimum tax floor established under Section 3.

This paragraph shall not apply to outright charitable gifts of appreciated assets where the taxpayer retains no income interest, annuity, or other economic benefit from the contributed property.

  1. (7) ANTI-CONVERSION RULE.—If a covered taxpayer transfers, contributes, or exchanges a tradable asset for an interest in an entity or arrangement that would be classified as an illiquid asset under this Act, the transferred asset shall retain its classification as a tradable asset for purposes of mark-to-market valuation under paragraph (1), and the taxpayer shall continue to include in total economic income the net unrealized gain attributable to the underlying tradable asset as though the transfer had not occurred. This paragraph shall apply to transfers to private investment funds, family limited partnerships, holding companies, trusts, and any other entity or arrangement, regardless of legal form, where the principal effect is to convert a tradable asset into an illiquid interest for purposes of this Act.

Sec. 5. TREATMENT OF ASSET-BACKED BORROWING AS ECONOMIC INCOME.

  1. (1) INCLUSION.—The aggregate amount of covered asset-backed borrowing received by a covered taxpayer during the taxable year shall be included in total economic income, to the extent such aggregate amount exceeds $1,000,000 for the taxable year.
  2. (2) CREDIT ON REPAYMENT OR DISPOSITION.—Upon repayment of a covered loan from the proceeds of a taxable disposition of the collateral, the taxpayer shall receive a credit against tax otherwise due equal to the tax previously paid under this section on the included loan proceeds, to prevent double taxation.
  3. (3) REFINANCING.—Refinancing, renewal, or rollover of a covered loan shall not reset the inclusion under paragraph (1). Any additional loan proceeds received in excess of the outstanding balance of the original loan shall be treated as new covered asset-backed borrowing for the taxable year.
  4. (4) AGGREGATION.—For purposes of the $1,000,000 threshold under paragraph (1), covered asset-backed borrowing shall be aggregated across the covered taxpayer, the taxpayer's spouse, any dependent of the taxpayer, any trust or estate in which the taxpayer holds a beneficial interest or exercises control, and any entity in which the taxpayer holds a controlling or significant interest (defined as 25 percent or greater ownership, voting power, or beneficial interest). All borrowing by such persons and entities secured by the taxpayer's appreciated assets, or by appreciated assets attributable to the taxpayer, shall be treated as borrowing by the taxpayer.
  5. (5) ANTI-AVOIDANCE.—The Secretary shall promulgate regulations to prevent circumvention of this section through the use of intermediaries, related-party lending, pledges of assets held by trusts or entities controlled by the taxpayer, daisy-chain lending arrangements, or any other arrangement the principal purpose of which is to obtain the economic benefit of borrowing against appreciated assets without triggering inclusion under this section. Any such arrangement identified by the Secretary shall be disregarded and the borrowing shall be attributed to the covered taxpayer as though the arrangement did not exist.

Sec. 6. ELIMINATION OF STEPPED-UP BASIS AT DEATH.

  1. (1) CARRYOVER BASIS.—On and after the date of enactment of this Act, the basis of any asset acquired from a decedent shall be equal to the decedent's adjusted basis in such asset immediately before death, rather than the fair market value at the date of death.
  2. (2) RECOGNITION AT DEATH.—Unrealized gains on all assets held by a covered taxpayer at the time of death shall be recognized and included in the decedent's final return as total economic income, subject to the minimum tax under Section 3.
  3. (3) EXEMPTIONS.—The following transfers shall be exempt from recognition under paragraph (2)—
    1. (a) transfers to a surviving spouse, provided that the spouse assumes the decedent's adjusted basis (deferral, not exemption) and provided further that assets transferred from a decedent who was a covered taxpayer shall be treated as covered assets in the hands of the surviving spouse—the spouse shall be subject to the mark-to-market, minimum tax, and reporting obligations of this Act with respect to such assets regardless of whether the spouse's own total economic income independently exceeds the threshold under Section 2(1);
    2. (b) transfers of a personal residence with unrealized gain not exceeding $5,000,000; and
    3. (c) transfers of an active family-owned business interest, provided that the heir continues to materially participate in the business for not fewer than 10 years, with recapture of the deferred tax plus interest at the applicable federal short-term rate plus 3 percentage points if the business is sold or the heir ceases to materially participate before the 10-year period expires. For purposes of this subparagraph, "material participation" requires that the heir (i) devotes more than 50 percent of their working time to the active conduct of the business, (ii) derives more than 50 percent of their gross earned income from the business, and (iii) is involved in the day-to-day management or operations of the business in a capacity beyond serving solely as a director, officer, or passive investor. The heir shall file an annual certification with the Secretary attesting to continued material participation, and the Secretary may audit such certification at any time during the 10-year period.

Sec. 7. EXPATRIATION TAX.

  1. (1) DEEMED DISPOSITION.—Any individual who is or was a covered taxpayer in any of the five taxable years preceding the date of expatriation and who relinquishes United States citizenship or ceases to be a lawful permanent resident shall be treated as having sold all assets (tradable and illiquid) at fair market value on the day before expatriation. All resulting gains shall be included in total economic income for the final taxable year and shall be subject to the minimum tax under Section 3.
  2. (2) DEFERRED ILLIQUID GAINS.—For purposes of paragraph (1), all deferred gains on illiquid assets shall be recognized immediately, and the interest charge under Section 4(5) shall apply through the date of expatriation.
  3. (3) NO EXEMPTIONS.—The exemptions provided under Section 6(3) shall not apply to deemed dispositions under this section. The spousal deferral, personal residence exclusion, and family business deferral are not available upon expatriation.
  4. (4) COLLECTION AUTHORITY.—The Secretary may place liens on any assets of the expatriating taxpayer remaining within United States jurisdiction and may enter into collection agreements with foreign tax authorities to ensure payment of the tax imposed under this section.

Sec. 8. INCENTIVE CREDITS AGAINST THE MINIMUM TAX.

  1. (1) JOB CREATION CREDIT.—A covered taxpayer shall be allowed a credit against the minimum tax imposed under Section 3 equal to 10 percent of the total compensation paid during the taxable year for each net new qualifying position created during such year, up to a maximum credit of 5 percentage points of the taxpayer's total economic income.
  2. (2) HIGHER EDUCATION CREDIT.—A covered taxpayer shall be allowed a credit against the minimum tax imposed under Section 3 equal to 100 percent of qualified education expenditures made during the taxable year, up to a maximum credit of 5 percentage points of the taxpayer's total economic income.
  3. (3) COMBINED LIMITATION.—The total credits allowed under this section shall not reduce the taxpayer's effective federal tax rate below 15 percent of total economic income for the taxable year, as provided in Section 3(2).
  4. (4) NO CARRYFORWARD.—Credits under this section that exceed the amount allowable for the taxable year may not be carried forward to subsequent taxable years. Credits must be earned and applied in the same taxable year.
  5. (5) SUBSTANTIATION.—A covered taxpayer claiming credits under this section shall maintain and provide to the Secretary upon request—
    1. (a) for the job creation credit: payroll records, employment contracts, evidence of health coverage and retirement contributions, and a certified statement of net new qualifying positions compared to the prior taxable year; and
    2. (b) for the higher education credit: receipts, enrollment verification from the accredited institution, and identification of the employees or dependents on whose behalf payments were made, or documentation of scholarship fund contributions and the fund's selection criteria.

Sec. 9. REPORTING AND TRANSPARENCY.

  1. (1) COVERED TAXPAYER DISCLOSURE.—Each covered taxpayer shall file with the Secretary, as part of the annual tax return, a schedule disclosing—
    1. (a) total economic income, itemized by category (adjusted gross income, unrealized gains on tradable assets, covered asset-backed borrowing, and deferred illiquid gains recognized during the year);
    2. (b) the effective federal tax rate before and after application of incentive credits;
    3. (c) a description of all tradable assets marked to market and the net gain or loss thereon;
    4. (d) the aggregate amount of outstanding covered asset-backed borrowing as of the end of the taxable year; and
    5. (e) a description of all incentive credits claimed, including the number of net new qualifying positions and the amount of qualified education expenditures.
  2. (2) AGGREGATE PUBLIC REPORTING.—The Secretary shall publish annually an aggregate statistical report, without identifying individual taxpayers, showing the number of covered taxpayers, the distribution of effective tax rates before and after incentive credits, the total revenue collected under this Act, and the total credits claimed by category.

Sec. 10. PENALTIES.

  1. (1) UNDERPAYMENT.—A covered taxpayer who fails to pay the minimum tax required under Section 3 shall be subject to a penalty equal to 25 percent of the underpayment, in addition to interest on the unpaid amount at the applicable federal rate plus 5 percentage points.
  2. (2) FAILURE TO DISCLOSE.—A covered taxpayer who fails to file the schedule required under Section 9(1) or who materially understates total economic income shall be subject to a penalty of the greater of $500,000 or 5 percent of total economic income for the taxable year.
  3. (3) FRAUDULENT UNDERREPORTING.—A covered taxpayer who willfully understates total economic income or willfully claims credits to which the taxpayer is not entitled shall be subject to a penalty of 75 percent of the underpayment attributable to the fraud, in addition to any criminal penalties applicable under existing law.
  4. (4) ANTI-AVOIDANCE VIOLATIONS.—Any person who participates in an arrangement the principal purpose of which is to enable a covered taxpayer to avoid the minimum tax under this Act shall be subject to a civil penalty of up to $1,000,000 per arrangement.

Sec. 11. EFFECTIVE DATE.

  1. (1) This Act shall take effect for taxable years beginning after December 31 of the year of enactment.
  2. (2) The mark-to-market provisions of Section 4 shall first apply to the taxable year beginning after December 31 of the year of enactment, using the taxpayer's adjusted basis in tradable assets as of that date.
  3. (3) The elimination of the stepped-up basis under Section 6 shall apply to decedents dying after the date of enactment.
  4. (4) The expatriation tax under Section 7 shall apply to any individual who relinquishes citizenship or permanent residency on or after the date of enactment.
  5. (5) The Secretary shall promulgate all regulations required under this Act not later than 180 days after the date of enactment.

Sources

  1. Congressional Budget Office, "The Distribution of Household Income, 2021." https://www.cbo.gov/publication/59509
  2. White House Council of Economic Advisers, "What Is the Average Federal Individual Income Tax Rate on the Wealthiest Americans?" September 2021. https://bidenwhitehouse.archives.gov/cea/written-materials/2021/09/23/what-is-the-average-federal-individual-income-tax-rate-on-the-wealthiest-americans/
  3. U.S. Treasury, Remarks by Assistant Secretary for Tax Policy Lily Batchelder on Tax Evasion and Tax Avoidance, May 2022. https://home.treasury.gov/news/press-releases/jy0767
  4. Congressional Budget Office, "Change the Taxation of Assets Transferred at Death," Budget Options, 2024. https://www.cbo.gov/budget-options/60943