It’s Property > People: How the US Tax System Rewards Asset Holders Through “Buy, Borrow, Die” and Other Tax Glitches

Most Americans make their living working a job, and they pay a large share of America's taxes — effectively carrying the country's budget (opens in a new tab) on the backs of working families.

At the same time, America’s wealthiest (think: centi-millionaires and billionaires) are playing by a very different set of rules that help them stay rich while reporting very little income.

Folks on both sides of the political aisle have called out the clear "unfairness" of the tax system. Taxes have fallen for over 70 years, but you might not have noticed if you’re an average worker, because your taxes have actually gone up.

Preferential treatment for those who need it least: In recent weeks, we’ve been tackling big tax topics — how the system works, why it doesn’t work, and what to do about it. Conveniently, the US is now facing pressures over the sustainability of its tax regime (opens in a new tab). Despite these budget problems, President Donald Trump just proposed even more tax cuts that would help a group that already gets unusually good treatment: property owners. Their capital grows through a strategy known as "buy, borrow, die."

• Property > people (buy): Owning property — things like homes, stocks, and bonds — is taxed at lower rates than the wages that workers pay through payroll taxes and regular income tax.

• Assets give you leverage (so borrow): Wealthy people aim to avoid taxes — or defer them for as long as they can — so instead of selling assets that have gone up in value (which would trigger a tax bill), they borrow against those assets instead.

• It’s never been more profitable to (die): Once the owner dies, their assets get a fresh start through something called a "step-up in basis," effectively resetting the purchase price for their heirs and wiping out the gains built over the owner's lifetime.

The Move Costing Us Trillions

“Buy, borrow, die” shows how the tax system favors people who own assets over people who work for a living. And even though you won't be around to enjoy the last step yourself, you can still make this system work for your family — just probably not on the same scale as billionaires.

• Do the buying and borrowing: You have your whole life to build a portfolio, buy a house, and enjoy the benefits along the way.

• Plan now, not later: Most Americans don't have a formal estate plan (like a will or trust), so getting your assets in order and naming your beneficiaries is essential.

Then it passes on for crumbs: When you die, your assets that have gone up in value get reset, and your gains disappear for tax purposes as they pass to the next generation. For example, say you bought $400K of stock in a taxable account, and it grew to $1M by the time you died. Your heir's basis (the value used to calculate future taxes) gets reset to $1M — the gain is wiped out. The same applies to your home, where the step-up in basis resets the capital gains amount.* (Of course, there are exceptions — estates of a certain size are subject to a different set of taxes, but this only affects a few thousand Americans per year.)*