Interesting article that basically says that the best way to tax the ultra-wealthy would be to put a tax on very large loans using assets as collateral. Currently, the wealthy can use this as a loophole to avoid paying the capital gains tax.
What do people think about this?
It seems to me like a much smarter alternative to the tax on unrealized capital gains, because it solves the problem of figuring out how to value all kinds of obscure investments that could have no agreed-upon market value (i.e. they aren’t traded on an exchange and the value is not necessarily known) or a rapidly fluctuating market value - once someone has to declare that their investments are worth X in order to take out a loan, you know you can tax them on that exact number.
“Alternative” is the problem. If you tax these loans but stop taxing capital gains, you’ve just given them another path to tax avoidance. The goal is to plug loopholes, not shift them around.
The author makes some good points about the proposals that have already been made, but then he ruins it by making possibly the most illogical proposal yet.
What legal, moral, or philosophical grounds could there possibly be for basing a tax on something that you don’t own and never will own? The author wants to turn the fields of law and economics upside down by making “temporary possession” = “ownership.”
Will he balance out his proposal by giving billionaires a tax refund when they pay back a loan?
I mean an alternative to the proposed tax on unrealized capital gains, not the existing capital gains tax. This allows for taxes on rich people who build wealth through their investments but never actually sell their investments.
I think for this to work you would have to either actually do this or treat the tax as a real wealth tax and make it really small (much smaller than the proposed 10%).
In the hypothetical perfect wealth tax where a supercomputer finds an objective way to measure everyone’s wealth you would have to make the percentage tax rate really small because the same money would get taxed over and over again and it seems like a similar thing would happen if you taxed the loan but didn’t at least partially refund a cash payment of the loan.
This article is paywalled for me. From what I can make of the excerpt you included, I made a similar proposal back in this post. Instead of a flat 10% tax on the loan, I would just use the existing income tax percentages already in place, so 37% for income over $523,600 in 2021-2022.
Simultaneously, I would raise capital gains tax rates to match income tax rates, if the net worth of assets sold that year exceeds a certain amount. Combined, these two initiatives should close all the major loopholes I can think of at the moment, but I’m sure they’d come up with more ingenious ones. It’s still a good start, though.