The Billionaires Income Tax Act targets ultra-wealthy individuals by requiring them to pay taxes annually on their investment gains, rather than allowing them to defer taxes indefinitely. The bill focuses on closing what's known as the "buy, borrow, die" strategy, where billionaires purchase appreciating assets, borrow money against those assets to fund their lifestyles without triggering taxes, and then pass the assets to heirs at death with a "stepped-up basis" that erases the accumulated gains from taxation.

The bill works in two main ways. First, it requires billionaires to pay taxes each year on the value their investments gain, similar to how working people pay taxes on wages. For assets that are easily tradable (like stocks), billionaires would owe taxes annually on any appreciation. For harder-to-value assets (like private businesses), they'd owe taxes when they sell or transfer the asset. Second, the bill closes various tax loopholes that allow the wealthy to avoid taxes, including eliminating the stepped-up basis at death, restricting special tax breaks for small business investments, and preventing the use of trusts and other structures to indefinitely defer taxes.

Essentially, this bill aims to ensure that billionaires pay taxes on their investment income every year, just like middle-class workers do on their paychecks, rather than being able to accumulate wealth tax-free for decades or even a lifetime.