How realistic is the threat of the Billionaire Minimum Tax? Surely the Democrats will never keep the house and get more seats in the Senate… Will they?? 

Are you resting on your laurels about the impending mid-terms? Are future Democrat wins really that inconceivable? Consider a Backup Plan NOW – and protect your assets from a Potential ‘Billionaire Minimum Tax’

The “TAX THE RICH” slogan has always held potent political appeal; from the barricades of the French Revolution to rioters worldwide ever since. However, unlike at the time of the French Revolution, today’s wealth is not tied to immovable real estate. Rather the rich and their wealth are extremely mobile… just so long as they plan ahead.

Taxation in a Democracy is Nine Wolves and a Sheep voting over what’s for dinner

Biden The Billionaire Minimum Tax
Will Biden’s plans for a Billionaire Minimum Tax pass?

The current US “Tax the Rich” war cry was started by the progressive wing of the Democratic Party in the run-up to the 2018 mid-term elections. It has been further fuelled by the Democratic sweep in the 2020 election. The narrative that the wealthy are not “paying their fair share” is further fuelled by the efforts of groups like ProPublica and Oxfam. Clearly the “Let’s get money for good things” rhetoric has been replaced with a “Let’s take money from bad people” manifesto.

The latest manifestation of this effort was the March 28, 2022 publication of POTUS Biden’s Green Book.  While there are a number of significant proposals, the one that has garnered the most attention is the so-called “Billionaire Minimum Tax” (BMT). This proposal calls for the ANNUAL taxation of 20% of the UNREALISED capital gains of any US taxpayer with a net worth over $100M USD.


Don’t let today’s polls make you complacent.

The general political wisdom is that President Biden would be unsuccessful in passing the BMT, with Senator Joe Manchin being a key reason for it failing. However, US midterm elections are only six months away…a lifetime in US politics. So there is the potential for the Democrats to hold onto the house and strengthen their majority in the senate.

What happens if you wake up on November 4th, 2022 OR 2024 and this is the case?  If the Senate were to shift in this way, Biden would no longer be at the mercy of Manchin’s vote. This new wealth tax may be passed regardless of Manchin’s vote. In fact, if he and Senator Sinema no longer held “the whip hand”, they may well join the clear Senate majority in voting for these policies.

At what level of threat should you take action?

Many HNW Americans and their advisors believe that this is an unlikely outcome for the 2022 midterms. I would agree.

Nevertheless, even if one puts the odds of this outcome at 25%, prudence would dictate that it is an outcome worth preparing to avoid… especially if a strategy to avoid the impact of these changes is relatively inexpensive to acquire. In other words, if you thought there was a 25% chance that your fiscal house would burn to the ground, would you engage in all available Fire Prevention techniques; buy Fire Insurance; and have a Fire Escape Plan…just in case?

The Billionaire Minimum Tax

To illustrate, if the BMT is passed, a client worth $100 million would lose $20 million annually.

For many, avoiding this level of annual tax is more than enough motivation to act You can put in place a strategy that gives you the choice to pay the capital gains tax ONCE, and be done with the US tax system forever!

While the cost of being prepared to avoid the annual impact of the BMT is relatively small (compared to the tax hit) it cannot be carried out overnight. It also can’t be hurried through between the mid-term election and the swearing-in of a new Congress. This is especially true since they must plan and execute the following within the next six months:

1) Fire Prevention (i.e. Domestic tax planning): GRAT, QSBS, Using Unified Credit, tax harvesting, etc. etc.;

2) Fire Insurance: Acquire a Second Citizenship and Residence;

3) Fire Escape Plan: Asset by asset strategy to minimise one time “Exit Tax” including third party asset valuations and to plan for future bequests to US person heirs;

Isn’t my existing Fire Prevention enough to avoid The Billionaire Minimum Tax?

If you and your advisor believe that Fire Prevention alone is sufficient then take note. A quick look at just two Green Book tax proposals on the “Step-up rule” and GRATS should dissuade you of this fantasy.

One key element in the Biden plan is to eliminate the “Step-up” system. The Step-up allows wealthy heirs to avoid paying capital gains tax on stocks and other assets which they inherit. The anti-GRAT (grantor-retained annuity trusts) proposals have also been designed to halt this perceived dynasty building.

I am not taking sides here. I am merely pointing out with current Fire Prevention strategies HNW American families will still be under threat from any Democratic administration over the coming years.

Fire Insurance and a Fire Escape Plan are key to a Backup Plan

I have been an adviser to HNW families for over 30 years. Therefore I’ve experienced the challenges – and often dire consequences – faced by many wealthy Americans who just did not take the right steps within the right time frame. Happily, I have been able to help many more who anticipated the predictable and acted in a prudent and timely manner.

So what do you need for your own Backup Plan?

First, understand that it is key that Fire Insurance and a Fire Escape Plan work in synch. They should always support any Fire Prevention strategies that your advisors may have in place.

Second, in designing a Fire Insurance and Fire Escape Plan it is necessary for you to secure experienced, non-conflicted expert advice. The internet is full of “Second Passport Advisors” who are in reality commission-driven salespeople. They push a particular “product” that may be overpriced and inappropriate for your specific strategy.

Finally, the Fire Insurance and Fire Escape advisors need to work in sync with you and your current trusted advisors. This way you will have a strategy that not only works seamlessly and tax-efficiently… but which also can be sold “at the breakfast table” to all family members who will be impacted.

When should I take action and what is my first step?

The more uncertain the times, the more heightened the passions of voters and politicians. Therefore, the more essential it is to be prepared beforehand. The speed of change of political fortunes in the US has accelerated significantly in the past few years. There are daily news revelations of misconduct and war; market uncertainty;  inflation woes; and the undeniable impact of pending public hearings of the Jan.6th Committee. Within this landscape, it is difficult to believe that today’s poll numbers will remain frozen until the mid-term or next general election.

The first step you should take is to arrange a consultation with yourself and your key advisors. You need to understand the options available to you for a Backup Plan that works in sync with your Fire Prevention strategy.

As my first mentor taught me, “The secret of long-term lasting success is to anticipate the predictable…and the unexpected!”

If you would like some specialized and un-biased advice on any of these issues please reach out. We can schedule a convenient time and date for a formal consultation.

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