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California’s wealth tax doesn’t fix the real problem: Billionaires who borrow money, tax-free

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California’s proposed wealth tax aims to go after billionaires’ balance sheets, but it largely sidesteps the way many ultrawealthy people actually generate spendable cash: they borrow against their assets, tax‑free, and never “realize” income in the first place. As long as that borrowing model stays intact, a one‑time levy on wealth may raise money once, but it does little to change the system that lets cash‑poor billionaires live richly while reporting very little taxable income.​

California is weighing a ballot measure, the Billionaire Tax Act, that would impose a one‑time 5% tax on the total assets of state residents worth $1 billion or more. The tax would apply to anyone who was a California resident on January 1, 2026, with payment due in 2027 and the option to stretch it over five years for an additional charge.​

Supporters, led by a major healthcare workers’ union, pitch the measure as a way to raise roughly $100 billion to backfill expected federal healthcare cuts and force the wealthy to pay what they call their fair share. Gov. Gavin Newsom has warned that the levy could backfire by accelerating a departure of high‑net‑worth residents, even as he continues to defend the state’s broader progressive tax system.​

To take this example from the abstract into the practical, consider the examples of Elon Musk, the world’s richest man, and Mr. Beast, the world’s most popular YouTuber. Musk does not live on a normal “salary” the way most people do, with most of his wealth tied up in shares of his companies such as Tesla and SpaceX, and he typically finances his spending by borrowing against those holdings and occasionally selling stock. In that sense, he is extremely asset‑rich but comparatively low on ordinary cash income, using large credit lines backed by his equity to pay for homes, jets, and other expenses instead of taking regular paychecks.

Mr. Beast, meanwhile, told The Wall Street Journal just days ago that he has “negative money right now … “I’m borrowing money right now — that’s how little money I have.” While he isn’t the CEO of a publicly traded company like many of the California billionaires being targeted by this proposed tax, Mr. Beast, or Jimmy Donaldson, is always reinvesting in his content, he explained, leaving very little in his bank account.

Anduril founder Palmer Luckey pointed out this tension in a heated social media exchange with Rep. Ro Khanna, who supports the billionaire tax. “You are fighting to force founders like me to sell huge chunks of our companies to pay for fraud, waste, and political favors for the organizations pushing this ballot initiative,” Luckey wrote, noting that the tax would create more problems than it would solve. Other executives voted with their feet, with the Google guys saying goodbye to California, The New York Times reported, as Larry Page and Sergey Brin both moved to sever ties, Page with a very Bezosian playbook centered on trophy properties in Miami. Here’s why Luckey has a point that this tax is going after the wrong things, and the strange reason these billionaires don’t actually have that much cash on hand.

The ‘Buy‑Borrow‑Die’ reality

The deeper problem lies in how modern billionaires convert paper wealth into cash without ever showing much taxable income. Rather than selling stock or private‑company shares and realizing capital gains, they pledge those assets as collateral, borrow against them, and use the loan proceeds to fund everything from yachts and mansions to new investments.​​

Because U.S. tax law does not treat borrowed money as income, these loans incur no income‑tax bill, even when they finance lavish lifestyles. Policy analysts often describe this as the “buy, borrow, die” strategy: buy appreciating assets, borrow against them to live, then let heirs inherit those assets with stepped‑up basis after death, erasing much of the embedded tax liability.​

Under U.S. tax law, loan proceeds are not treated as income because they must be repaid, so they are not taxed when received.​ If a billionaire borrows against appreciated stock or real estate instead of selling it, there is no sale, so no capital gain is realized and no capital gains tax is triggered.​

It works like this:

  • Step 1 – Buy: They acquire assets expected to appreciate over time (founder stock, real estate, private businesses) and hold them for decades, letting gains build up untaxed as “unrealized” gains.​
  • Step 2 – Borrow: They pledge those assets as collateral for large credit lines or loans (e.g., margin loans, securities‑backed lines of credit, loans against real estate) and live or invest using that borrowed cash instead of selling.​
  • Step 3 – Die: When they die, heirs get a “step‑up in basis,” meaning the tax cost basis resets to current market value, wiping out the built‑up unrealized gain for income‑tax purposes.

Why a One‑Time Wealth Tax Misses

California’s own fiscal watchdogs have noted that many top earners already avoid large state income taxes by borrowing against appreciated stock instead of selling it. A one‑time 5% charge on net worth would hit that accumulated wealth once, but wouldn’t touch the ongoing flow of tax‑free cash that comes from asset‑backed borrowing.​ As Luckey notes, it would force these billionaires to liquidate assets to come up with the cash that the law would require, making a move out of California an easier alternative for those with the means to do it—and billionaires have the means.

Critics warn the proposal could encourage more billionaires to leave without permanently changing their incentives to realize income or pay taxes where they actually live. Venture capitalist Chamath Palihapitiya estimates that about $1 trillion in billionaire wealth has already left California amid the tax fight, raising the risk that the state loses future income‑tax revenue while capturing only a single extraordinary haul.​

Solving the real problem

Tax experts argue that if policymakers want to reach the cash‑poor, asset‑rich class, they must tax the proceeds of wealth, not just the stock of it at a moment in time. Proposals include state‑level “wealth proceeds” taxes that more comprehensively tax capital gains and investment income, and reforms to reduce the bias that favors borrowing over selling appreciated assets.​ Edward Fox and Zachary Liscow, law professors at the University of Michigan and Yale, respectively, have suggested a way to close the “billionaire borrowing loophole” by changing the law so that borrowing is treated as income.

Without such structural changes, California’s wealth tax risks being a dramatic, politically appealing gesture that leaves the core architecture of billionaire tax avoidance—and the tax‑free loans that underpin it—largely intact.​ And it would seemingly leave California with a lot fewer billionaires.

For this story, Fortune journalists used generative AI as a research tool. An editor verified the accuracy of the information before publishing.



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Trump is sorry for deporting college student who flew home to surprise her family for Thanksgiving, but is still deporting her

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The Trump administration apologized in court for a “mistake” in the deportation of a Massachusetts college student who was detained trying to fly home to surprise her family for Thanksgiving, but still argued the error should not affect her case.

Any Lucia Lopez Belloza, a 19-year-old Babson College freshman, was detained at Boston’s airport on Nov. 20 and flown to Honduras two days later. Her removal came despite an emergency court order on Nov. 21 directing the government to keep her in Massachusetts or elsewhere in the United States for at least 72 hours.

Lopez Belloza, whose family emigrated from Honduras to the U.S. in 2014, is currently staying with grandparents and studying remotely. She is not detained and was recently visiting an aunt in El Salvador.

Her case is the latest involving a deportation carried out despite a court order. Kilmar Abrego Garcia was deported to El Salvador despite a ruling that should have prevented it. The Trump administration initially fought efforts to bring him back to the U.S. but eventually complied after the U.S. Supreme Court weighed in. And last June, a Guatemalan man identified as O.C.G. was returned to the U.S. after a judge found his removal from Mexico likely “lacked any semblance of due process.”

At a federal court hearing Tuesday in Boston, the government argued the court lacks jurisdiction because lawyers for Lopez Belloza filed their action several hours after she arrived in Texas while en route out of the country. But the government also acknowledged it violated the judge’s order.

In court filings and in open court, government lawyers said an Immigration and Customs Enforcement deportation officer mistakenly believed the order no longer applied because Lopez Belloza had already left Massachusetts. The officer failed to activate a system that alerts other ICE officers that a case is subject to judicial review and that removal should be halted.

“On behalf of the government, we want to sincerely apologize,” Assistant U.S. Attorney Mark Sauter told the judge, saying the employee understands “he made a mistake.” The violation, Sauter added, was “an inadvertent mistake by one individual, not a willful act of violating a court order.”

In a declaration filed with the court Jan. 2, the ICE officer also admitted he did not notify ICE’s enforcement office in Port Isabel, Texas, that the removal mission needed to be canceled. He said he believed the judge’s order did not apply once Lopez Belloza was no longer in the state.

The government maintains her deportation was lawful because an immigration judge ordered the removal of Lopez Belloza and her mother in 2016, and the Board of Immigration Appeals dismissed their appeal in 2017. Prosecutors said she could have pursued additional appeals or sought a stay of removal.

Her lawyer, Todd Pomerleau, countered that she was deported in clear violation of the Nov. 21 order and said the government’s actions deprived her of due process. “I was hoping the government would show some leniency and bring her back,” he said. “They violated a court order.”

U.S. District Judge Richard Stearns said he appreciated the government acknowledging the error, calling it a “tragic” bureaucratic mistake. But appeared to rule out holding the government in contempt, noting the violation did not appear intentional. He also questioned whether he has jurisdiction over the case, appearing to side with the government in concluding the court order had been filed several hours after she had been sent to Texas.

“It might not be anybody’s fault, but she was the victim of it,” Stearns said, adding at one point that Lopez Belloza could explore applying for a student visa.

Pomerleau said one possible resolution would be allowing Lopez Belloza to return to finish her studies while he works to reopen the underlying removal order.

This story was originally featured on Fortune.com



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One year after Bill Gates surprised with the choice to close his foundation by 2045, he’s cutting staff jobs

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The Gates Foundation announced Wednesday that it will spend a record $9 billion in 2026, maximizing its spending in key areas such as global health. At the same time it will begin reducing the number of staff positions it has by as much as 500 over five years. This announcement comes in the wake of last year’s surprise decision to shutter the foundation in 2045.

The planned layoffs mark another major shift for one of the largest and most influential foundations in the world at a time when many of its long-term priorities, such as addressing poverty and improving global health, have been undermined by cuts in U.S. government spending by the Trump administration.

Bill Gates said last year that the foundation would spend $200 billion over the next 20 years and then close as part of his plan to give away the bulk of his wealth. This week, he and other members of the foundation’s board approved the largest budget in the foundation’s history, topping last year’s budget of $8.74 billion. With that new dollar amount, the foundation will increase budgets for several programs, including women’s health, vaccine development, polio eradication, AI, and U.S. education.

The board also approved a proposal to cap operating costs — including staff, salaries, infrastructure required to run the organization, facilities, and travel expenses — at no more than $1.25 billion, or approximately 14% of the foundation’s budget. To meet that goal, the grantmaker will cut up to 500 of its 2,375 staff positions by 2030, including some open roles that may remain unfilled. The effort to reduce the staff count along with other expenses will be done incrementally and reviewed annually rather than coming in “a big wave,” foundation CEO Mark Suzman told the Chronicle of Philanthropy in an interview.

“We will do this thoughtfully, carefully, and systematically,” he said. “We’ll be recalibrating it every year. That 500-person target is a maximum target. I very much hope that we won’t have to do it as large as that number.”

Spending money prudently

Suzman said he and other board members felt the operating costs cap was necessary. If left unchecked, the foundation’s operating expenditures, currently around 13% of the budget, were projected to approach 18% by the end of the decade, Suzman said. The board wants to ensure that the foundation is spending money prudently and with a focus on maximizing the dollars spent and resources provided to the people the foundation serves, he said.

The Gates Foundation is also the world’s largest foundation to decide to close, and many in philanthropy have wondered how its leaders will go about planning an exit strategy, said Elizabeth Dale, acting executive director and Frey Foundation Chair for Family Philanthropy at Grand Valley State University’s philanthropy center. She works with a group of about 20 foundations that are spending down their endowments. Sunsetting a foundation with the massive wealth of the Gates Foundation is unprecedented and will likely require strong strategic planning, Dale said before the release of the new budget and staffing details.

“My sense is that they spent the last year really trying to home in on their priorities and their strategy,” she said.

What’s next

Many of the foundation’s core areas of work and achievement over the past decades have suffered due to humanitarian aid cuts from the United States and other countries last year, making philanthropic support more critical. In a recent blog post, Bill Gates noted that the “world went backwards” last year when it comes to child deaths, with the number going up for the first time this century, from 4.6 million in 2024 to 4.8 million in 2025.

“The next five years will be difficult as we try to get back on track and work to scale up new lifesaving tools,” Gates wrote. “Yet I remain optimistic about the long-term future.” In an effort to address that backsliding, the foundation is expected to accelerate spending in three priority areas over the next two decades: maternal and child health, infectious disease prevention, and poverty reduction, Suzman said. It also is expected to increase some grant sizes over time, though not across the board.

In the same post, Gates also discussed the challenges that artificial intelligence poses, warning that the technology could disrupt the job market and be misused by “bad actors” if more attention isn’t paid to how it’s developed, governed, and deployed.

At the same time, Gates has championed AI adoption. The foundation was among a coalition of funders that last July pledged to offer $1 billion in grants and investments to help develop AI tools for public defenders, social workers, and other frontline workers in the United States over the next 15 years. And, Suzman noted, AI is one of the foundation’s portfolio areas that will continue to expand.

The foundation also is expanding its footprint in India and Africa. Earlier this week, it announced the creation of a new Africa and India Offices Division. Staff on the HIV and tuberculosis teams at Gates Foundation headquarters in Seattle also will be downsized as that work largely shifts to offices in Africa, he said.

20 more years to go

Though the foundation has announced plans to close, Suzman continues to remind people internally and externally that 20 years is still a significant amount of time for the Gates Foundation to operate and make an impact.

“We are moving into what I believe is going to be the most impactful period of the Gates Foundation in its history,” he said. “We’ve learned a huge amount over the last quarter century. We’ve built expertise, credibility, and partnerships. We now have a set of goals that are allowing us to focus with greater intentionality.”

____

Stephanie Beasley is fellowship director and a senior writer at the Chronicle of Philanthropy, where you can read the full article. This article was provided to The Associated Press by the Chronicle of Philanthropy as part of a partnership to cover philanthropy and nonprofits supported by the Lilly Endowment. The Chronicle is solely responsible for the content. For all of AP’s philanthropy coverage, visit https://apnews.com/hub/philanthropy.



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Americans have been quietly plundering Greenland for over 100 years, since a Navy officer chipped fragments off the Cape York iron meteorite

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The Army also imagined hundreds of miles of rail lines buried inside Greenland’s ice sheet. On Project Iceworm’s tracks, atomic-powered trains would move nuclear-tipped missiles in snow tunnels between hidden launch stations – a shell game covering an area about the size of Alabama.

In the end, Project Iceworm never got beyond a 1,300-foot (400-meter) tunnel the Army excavated at Camp Century. The soft snow and ice, constantly moving, buckled that track as the tunnel walls closed in. In the early 1960s, first the White House, and then NATO, rejected Project Iceworm.

A U.S. Army truck with railroad wheels sits on a 1,300-foot-long track beneath the snow at Camp Century, Greenland. This is the closest the military got to realizing Project Iceworm. Robert W. Gerdel Papers, Ohio State University

In 1966, the Army abandoned Camp Century, leaving hundreds of tons of waste inside the ice sheet. Today, the crushed and abandoned camp lies more than 100 feet (30 meters) below the ice sheet surface. But as the climate warms and the ice melts, that waste will resurface: millions of gallons of frozen sewage, asbestos-wrapped pipes, toxic lead paint and carcinogenic PCBs.

Who will clean up the mess and at what cost is an open question.

Greenland remains a tough place to turn a profit

In the past, the American focus in Greenland was on short-term gains with little regard for the future. Abandoned bases, scattered around the island today and in need of cleanup, are one example. Peary’s disregard of the lives of local Greenlanders is another.

History shows that many of the fanciful ideas for Greenland failed because they showed little consideration of the island’s isolation, harsh climate and dynamic ice sheet.

Large rusted construction trucks and some fuel drums.

World War II-vintage trucks abandoned at a U.S. airfield in east Greenland were still there decades later. Posnov/Moment via Getty Images

Trump’s demands for American control of the island as a source of wealth and U.S. security are similarly shortsighted. In today’s rapidly warming climate, disregarding the dramatic effects of climate change in Greenland can doom projects to failure as Arctic temperatures climb.

Recent floods, fed by Greenland’s melting ice sheet, have swept away bridges that had stood for half a century. The permafrost that underlies the island is rapidly thawing and destabilizing infrastructure, including the critical radar installation and runway at Thule, renamed Pituffik Space Base in 2022. The island’s mountain sides are crashing into the sea as the ice holding them together melts.

The U.S. and Denmark have conducted geological surveys in Greenland and pinpointed deposits of critical minerals along the rocky, exposed coasts. However, most of the mining so far has been limited to cryolite and some small-scale extraction of lead, iron, copper and zinc. Today, only one small mine extracting the mineral anorthosite, which is useful for its aluminum and silica, is running.

It’s the ice that matters

The greatest value of Greenland for humanity is not its strategic location or potential mineral resources, but its ice. https://www.youtube.com/embed/9lnP0Rjb2E0?wmode=transparent&start=0 A NASA animation of satellite data shows Greenland’s ice sheet mass losses between 2002 and 2023, measured in meters of water equivalent in the ice.

If human activities continue to heat the planet, melting Greenland’s ice sheet, sea level will rise until the ice is gone. Losing even part of the ice sheet, which holds enough water to raise global sea level 24 feet in all, would have disastrous effects for coastal cities and island nations around the world.

That’s big-time global insecurity. The most forward-looking strategy is to protect Greenland’s ice sheet rather than plundering a remote Arctic island while ramping up fossil fuel production and accelerating climate change around the world.

Paul Bierman, Professor of Natural Resources and Environmental Science, University of Vermont

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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