RELEASE: Rep. Friedman Introduces Bill to Close Tax-Avoidance Loophole Used by the Ultra-Rich

October 20, 2026 Press Release Pay Your TAB Act taxes borrowing against a fortune the same as selling it, while protecting hardworking Americans & small business owners WASHINGTON, D.C. – Today, October 20, 2026, U.S. Congresswoman Laura Friedman (CA-30) introduced the Pay Your Taxes Avoided by Borrowing (TAB) Act , legislation to close the “buy, borrow, die” loophole that lets the wealthiest Americans turn stock and other assets into spendable cash without ever paying tax on their gains. A one-pager on the bill is available here . Full text is available here. The ultra-wealthy avoid paying taxes on their fortunes with a strategy known as “buy, borrow, die.” Under current law, gains on stock, real estate, and other assets are taxed only when the asset is sold. So instead of selling, the ultra-wealthy buy assets that grow in value, borrow against them, and live on the loan proceeds, which are not counted as income. When they die, those assets pass to their heirs with a stepped-up basis that erases the untaxed gain, so the gain is never taxed. The Pay Your TAB Act taxes large asset-backed loans at 23.8%, the top long-term capital gains rate plus the Net Investment Income Tax, so borrowing against a fortune is taxed the same way as selling it. “The Pay Your TAB Act closes a loophole the ultra-wealthy use to avoid paying taxes on fortunes 99% of Americans can’t imagine. They don’t sell the stock, they borrow against it, and a loan isn’t counted as income,” said Congresswoman Laura Friedman (CA-30). “My bill taxes those loans at 23.8%, the exact rate they’d owe by selling, while protecting mortgages, business loans, car loans, and student loans that hardworking families actually carry. It’s simple, it’s fair, it’s constitutionally sound, and it can be enforced the day it’s signed.” WHAT THE PAY YOUR TAB ACT DOES: Imposes a 23.8% excise tax, paid by the borrower, on covered loans issued after December 31, 2026. Applies only to the portion of a borrower’s total covered loans above $1 million, with related parties counted together so the threshold can’t be split. Prevents double taxation by giving the borrower an offsetting long-term capital loss, equal to the taxed loan amount, when they later sell the asset that secured the loan. Requires lenders to report covered loans above the threshold to the IRS and to borrowers, and directs Treasury to issue anti-avoidance rules. WHAT IS EXEMPT: Mortgages on a primary residence up to $3 million. Qualified student loans. Business loans, other than loans used to fund distributions. Qualified margin loans used for trading securities. Because the Pay Your TAB Act is an excise tax on the issuance of a loan, it rests on the same constitutional authority Congress has used to levy excise taxes since the nation’s founding. It applies only when a loan is issued, so it doesn’t require taxing unrealized gains on assets that have never been sold. The bill is also simple to enforce because the tax is based on the amount of the loan rather than on calculating the changing value of an asset. ###