How Jeff Bezos' heirs could end up paying tens of billions in tax

Jeff Bezos' heirs may have to pay tens of billions in taxes when the Amazon boss dies, under proposed new tax rules.

US President Joe Biden wants to close a loophole that allows the mega-rich to offload their wealth tax-free when they die, Bloomberg reports.

Bezos' wealth fluctuates with the stock market, but he's generally considered one of the top few richest people in the world, with a net worth of around US$200 billion - about the same as New Zealand's annual gross domestic product. 

Under the present rules, anyone who inherits Bezos' shares only has to pay capital gains taxes on any gains made from that moment on - known as the 'step-up in basis' rule. For example, if you inherited shares in a company worth $1 million and sold it the next day for $2 million, you'd only be liable to pay capital gains tax on the $1 million gain. 

The proposed new rule would reportedly apply a capital gains tax as soon as ownership in the shares transfer, as if they had been sold. That would make Bezos' heirs liable for up to US$36 billion in tax, Bloomberg says, based on Bezos' US$180 billion share in Amazon (10 percent of the company).

Biden wants to nearly double the top capital gains tax rate from 20 percent to 39.6 percent, taking Bezos' heirs liability to around US$70 billion. 

Combined with other taxes on the rich, CNBC said the well-off could soon face rates of up to 61 percent.

Congress analysis said removing the tax inheritance loophole could save the US government US$43 billion a year. 

Republicans say it would hit small- to medium-sized businesses hard, while the ultra-wealthy would be able to find ways to avoid it through complex accounting. 

CNBC reports moderate Democrats might also oppose the changes, which Bloomberg said would "amount to the biggest curb on dynastic wealth in decades, altering an American economic landscape dominated by a few wealthy families".

That's likely exactly what Biden is going for, the 78-year-old surprising many US political commentators with how radical many of his proposals since coming to office have been.