Avi-Yonah & Gamage: Billionaire Mark-To-Market Reforms

Reuven Avi-Yonah (Michigan; Google Scholar) & David Gamage (Indiana; Google Scholar), Billionaire Mark-to-Market Reforms: Response to Susswein and Brown, 176 Tax Notes Fed. 555 (July 25, 2022):

In their essay, Is It Time to Tax Disney’s Unrealized Capital Gains From 1965?, [176 Tax Notes Fed. 1717 (June 13, 2022),] Donald B. Susswein and Kyle Brown argue that a mark-to-market reform like the recent proposals for billionaire income tax reforms would amount to double taxation. We explain here why their arguments are incorrect. Instead, the primary impact of enacting a billionaire income tax reform would be to close the loopholes and combat the harmful political-optionality dynamics that enable many billionaire and megamillionaire taxpayers to fully and permanently escape income taxation on the majority of their true investment gains.

Conclusion
Susswein and Brown are simply wrong in claiming that a BIT reform would be double taxation. Quite the contrary, the primary effect of implementing a BIT reform would be to close loopholes and combat harmful political-optionality dynamics that enable many billionaires and megamillionaires to fully and permanently escape tax on most of their investment gains. BIT reforms would tax the likes of Jeff Bezos, Ellison, Elon Musk, and Zuckerberg on their billions of dollars of unrealized gains that will likely never be taxed under current law. Through doing so, a BIT reform would both rectify a major flaw in the existing tax regime and produce revenue that could be used to fund other worthwhile purposes.