According to Fortune, Brian Galle, a Georgetown Law professor who helped write the legislative text for California’s proposed “billionaires tax,” argues the current capitalist system “doesn’t seem to be working well.” He cites research showing billionaires pay an all-in tax rate 20% lower than the median U.S. household, largely due to the “buy-borrow-die” strategy of borrowing against unsold assets. Galle, who worked on Sen. Elizabeth Warren’s wealth tax plan, is promoting a federal solution called “FAST” in a new book, which would apply retroactive interest to delayed asset sales to remove the tax advantage of waiting. The proposal targets individuals with over $30 million in assets and aims to tackle the “step-up in cost basis” loophole for heirs. This comes after the Supreme Court’s 2024 Moore v. U.S. decision avoided ruling on taxing unrealized gains, a core issue for wealth taxes.
The Core Problem Is Optionality
Here’s the thing that Galle really hammers home: the super-rich have something the rest of us don’t—the power of timing. For most people, tax day is April 15th, and your W-2 income is what it is. But if your wealth is tied up in stocks or other assets, you get to decide when you sell and trigger a capital gains tax. You can just… not. Forever. Instead, you take out low-interest loans against your ballooning portfolio to live on. That’s the “buy-borrow-die” model, and it means your paper wealth can grow exponentially while your taxable income stays minimal. When you die, your heirs often get a “step-up in basis,” wiping out the capital gains tax liability entirely. It’s a pretty sweet deal if you can get it. Galle’s point is simple: a tax system where the richest players have an indefinite “pause” button isn’t a system, it’s a loophole with a country attached.
Why Most Wealth Taxes Fail (And Why FAST Might Not)
Critics, like tech billionaire Palmer Luckey, scream that wealth taxes force fire sales and kill jobs. Galle calls that “nonsense,” and he has a point about the math—borrowing 1% against a billion-dollar stock portfolio isn’t exactly a liquidity crisis. But the bigger historical argument is that wealth taxes get repealed, like in France. Galle counters by pointing to Switzerland and Spain. So what’s the difference? Basically, loopholes. Over time, the best lawyers find ways to hide or undervalue assets, especially tricky things like private businesses or, as Fortune noted, dinosaur bone collections. The FAST plan tries an end-run around this. Instead of taxing the unrealized gain directly (which the Supreme Court likely won’t allow), it says, “Fine, sell whenever you want. But we’re going to charge you retroactive interest from the time the gain accrued.” Suddenly, the financial benefit of delaying for decades evaporates. It’s clever because it attacks the incentive, not the asset.
The Supreme Court-Shaped Elephant in the Room
Galle isn’t naive. He knows the Moore v. U.S. decision from last year is the giant roadblock. The Court upheld a specific tax but pointedly refused to greenlight a broad tax on unrealized gains. As Galle admits, “the Supreme Court would probably say you can only tax people when they sell stuff.” That’s why FAST is designed as a tax on a realized event (the sale), just with an interest penalty for waiting. It’s a legal workaround. But let’s be skeptical. Do we really think the legal teams for the ultra-wealthy won’t challenge the retroactive interest as a de facto tax on the unrealized gain? The Court’s conservative majority seems deeply skeptical of novel tax expansions. Galle’s plan is intellectually elegant, but its biggest test might be at One First Street, not in Congress.
Is This About Revenue or Repair?
This is where the conversation gets philosophical. Wharton professor Kent Smetters tells Fortune that the revenue from billionaire taxes might be less than advocates hope, but the moral argument for fairness is “justified.” And I think that’s the real thrust here. Galle calls himself an “enthusiastic capitalist,” and his argument isn’t about tearing down the system. It’s about maintenance. He sees “disproportionate billionaire power” and a tax code that exacerbates inequality as bugs in the capitalist software, not features. The FAST plan and the California bill are attempts at a patch. Are they perfect? No. Are they politically daunting? Absolutely. But the underlying complaint is hard to dismiss: a system where the winners can largely opt out of paying for the society that enables their wealth is, in the long run, unsustainable. The question is whether anyone can fix it before it breaks.
