The current code taxes labor reliably while allowing capital, wealth, perks, and inherited appreciation to escape or defer tax. The Accord taxes progressively by broadening the base, applying higher rates at the top, and pairing broad consumption taxation with monthly rebates and luxury surcharges.
Capital income outranks labor income. Wages are taxed graduated up to ~37% federal; long-term capital gains are capped at 23.8%. Over fifty years that gap has compounded into a one-way ratchet — labor pays graduated rates, capital pays a flat preference, and at the top of the wealth distribution capital is most of what is earned.
Two structural escape routes amplify the gap. The buy-borrow-die loop allows appreciation to escape income tax during life (borrow against unrealized gains rather than sell) and receive stepped-up basis at death — meaning decades of capital growth pay zero income tax in any year. And carried interest converts compensation for managing other people's money into a capital gain, paying the favored rate on what is economically wage labor.
The favored rate (23.8%) continues to apply to qualifying long-term gains up to a per-filer lifetime cap of $10M (the Capital Gains Allowance, "CGAL"). Above the lifetime cap, gains are taxed at the filer's ordinary marginal rate — meaning the convergence rate at the top is 55.0%, not 23.8%.
The cap is lifetime, not annual. A small saver who realizes a one-time gain — a home sale, a private business exit, a vested-equity windfall — keeps the favored rate. A serial high-end realizer eventually crosses the cap and pays ordinary marginal on every dollar thereafter. Death is a realization event: stepped-up basis is eliminated, and accumulated gains on transferred assets are taxed at the decedent's marginal rate. Carried interest is taxed as ordinary income, not capital gain.
Filers whose lifetime cumulative qualifying gains exceed $10M. Practically: the top fraction of the top 1%. Below the cap — every retiree, every small saver, every middle-class filer who sells a home or a small business — the favored rate applies as today.
Ordinary long-term savers and retirement-account holders. The $10M lifetime cap is sized to fully cover a typical small-business sale, a typical home sale, and the realization of typical vested-equity windfalls. Inside qualified retirement accounts (401(k), IRA), the cap does not apply to inside-the-account gains; the cap counts only post-tax realizations after withdrawal.
Liquidity protections for illiquid-asset realizations at death are routed through the basis step-up elimination subpage (deferred realization at statutory interest, credited against estate tax).
Pending canonical scoring — rolled into income tax aggregate.
Capital-gains convergence is load-bearing for the wealth and estate architecture. Without it, the top of the income distribution can simply convert ordinary income into capital gain and pay the favored rate forever. Convergence above the $10M lifetime threshold makes that conversion uneconomic and lets the Estate Tax Prepayment Plan, basis-step-up elimination, and the estate tax actually collect revenue.
See tax ladder · fiscal scoring
- Wage-to-capital recharacterization
- Carried interest, founder-equity beyond a sweat-equity safe harbor, and partnership special allocations lacking economic substance flow back to ordinary income via the wage-to-capital subpage.
- Realization timing
- Death is a realization event — stepped-up basis is eliminated. Like-kind exchanges face cumulative caps. Buy-borrow-die's terminal step is closed.
- Cumulative-cap fractionation
- Qualifying gains aggregate across all entities the filer beneficially owns. Splitting holdings across LLCs, trusts, or family partnerships does not create multiple CGAL allowances.
The architecture closes the conversion routes that would otherwise let high-end income pay the favored rate forever.
- Progressive rate ladder
- Above the $10M lifetime cap, capital gains pay the ladder rate — top tier 55%. Convergence IS the ladder applied to gains.
- Comprehensive withholding base
- Realizations enter the same source-collection disclosure as compensation. False statement is independently tax fraud.
- Buy-borrow-die elimination
- Death is a realization event; basis step-up is gone. Lifetime accumulating appreciation enters the cap-counter at transfer or sale.
- Estate Tax Prepayment Plan
- The estate tax prepayment prices accumulating unrealized appreciation annually above the wealth threshold. Convergence prices the realization. Together they remove the incentive to accumulate without realizing.
- Estate tax
- v10.3 estate brackets: 35% ($10–50M), 45% ($50–250M), 55% ($250M–$1B), 60% above $1B. Basis step-up is eliminated. The estate pays capital-gains tax on accumulated gains at death (up to 55% top), then estate tax on the post-tax wealth at transfer. Accession tax on the heir's lifetime receipts is layered on top (15/25/35/40%). Prepayment paid during life is credited dollar-for-dollar against estate-tax liability.
The convergence rate is the ladder rate. The four income-side streams are inseparable: the comprehensive base is what the rules apply to; the rate ladder is what convergence converges into; convergence is what makes ordinary rates apply to capital above the lifetime cap; the estate tax prepayment and basis-step-up elimination prepay and force the realizations that the cap then meters.
Lifetime caps create lock-in: investors hold appreciated positions to avoid crossing the cap. Capital allocation distorts toward already-appreciated assets and away from new productive investment.
Lock-in pressure is bounded on three sides. The estate tax prepayment prices accumulating unrealized appreciation annually above the wealth threshold — holding the position is not free. Basis-step-up elimination forces realization at transfer or sale regardless of the cap — you cannot wait it out by dying. And the favored rate continues to apply below the cap, so the architecture preserves the standard portfolio-rotation incentive for ordinary investors. The architecture is deliberately layered: no single instrument carries the full anti-avoidance load.
Honesty about gaps. The Accord's credibility comes partly from explicit acknowledgment of what is not yet specified. The items below are flagged for v10.2 specification or for outside expert review.
- Cumulative tracking infrastructure: the $10M lifetime cap requires per-filer cumulative tracking across decades and across entities the filer beneficially owns. The IRS administrative architecture for this is not yet specified at v10.2 detail.