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How a $48B ETF Tax Loophole Became America’s Biggest Tax Escape Room
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Subscribe09 JUN 2026 / ACCOUNTING & TAXES
Tax strategists in the US have been utilising lesser-known tax breaks and loopholes related to ETFs, 351 conversions, qualified small business stock, stepped up basis, and the wider tax gap tied to pass-through income, provoking bigger questions about the sustainability of these tax planning methods. The ETF tax break, for example, is estimated to cost the US Treasury around $48 billion a year, with the top 1% of households receiving approximately 39.6% of this benefit. This use of legal deferrals and avoidances is increasingly causing concerns about significant revenue drain, prompting scrutiny from lawmakers, the Treasury, and the IRS.
A tax loophole rarely walks into the room wearing a name tag. It usually shows up in the fine print, sits quietly for years, and then one day someone in wealth management figures out how to turn it into real money. That is roughly where the U.S. tax...
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