# Tax the Richest... Loans **URL:** \ **Category:** Politics & Elections\ **Created:** [November 27, 2021, 9:36pm UTC](https://boards.straightdope.com/t/tax-the-richest-loans/955037 "2021-11-27T21:36:07Z")\ **Posts on this page:** 8\ **Page:** 1
**Author:** ![DeadTreasSecretaries](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/deadtreassecretaries/32/4817_2.png) [@DeadTreasSecretaries](https://boards.straightdope.com/u/DeadTreasSecretaries)\ **Post date:** [November 27, 2021, 9:36pm UTC](https://boards.straightdope.com/t/tax-the-richest-loans/955037/1 "2021-11-27T21:36:07Z")
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. > **[There's an easy way to tax billionaires that would actually work](https://www.businessinsider.com/easy-way-tax-billionaires-that-would-actually-work-tax-loans-2021-11?utm_source=reddit.com)** > > Congress should tax the personal loans that wealthy Americans take out to avoid paying taxes on their wealth. > [@](#): > > ## **Treat large loans as realized income** > > The equation for wealth preservation may be best summed up as: “buy, borrow, die.” In spite of this, tax policy has placed “borrowing” in a blind spot — a loan is viewed as a debt, not an asset. > > Ownership of a company or a stock only has value if it can generate cash flow or has resale value to others. But when stocks are used as collateral to draw a line of credit and avoid a taxable event, it creates immediate value for the owner. Fair and effective tax policy would treat large personal loans similar to realized income, because the value from the stock is being extracted, even if impermanently, by the owner. > > By placing a tax of 10% on large loans that are drawn against existing assets, the knock-on effect may also require high net-worth individuals to voluntarily sell their assets to cover the costs of the principal and interest, thereby triggering a larger capital gains tax. This tax policy would effectively reduce this popular tax avoidance scheme used by the wealthy around the world. It would ensure that the value that is captured by borrowing against assets is taxed — a value that grows larger every year. According to some estimates, [the wealthiest Americans avoid paying $163 billion in taxes every year](https://www.cnbc.com/2021/09/20/the-wealthy-may-avoid-163-billion-in-annual-taxes-how-they-do-it-.html), and debt is the primary tool used to escape tax burdens. 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. ---
**Author:** ![DMC](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dmc/32/18049_2.png) [@DMC](https://boards.straightdope.com/u/DMC)\ **Post date:** [November 28, 2021, 1:16am UTC](https://boards.straightdope.com/t/tax-the-richest-loans/955037/2 "2021-11-28T01:16:19Z")
> [@DeadTreasSecretaries](#): > > It seems to me like a much smarter **alternative** to the tax on unrealized capital gains… Bolding mine. “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. ---
**Author:** ![Bootb](https://avatars.discourse-cdn.com/v4/letter/b/e19b73/32.png) [@Bootb](https://boards.straightdope.com/u/Bootb)\ **Post date:** [November 28, 2021, 3:43am UTC](https://boards.straightdope.com/t/tax-the-richest-loans/955037/3 "2021-11-28T03:43:40Z")
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? ---
**Author:** ![DeadTreasSecretaries](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/deadtreassecretaries/32/4817_2.png) [@DeadTreasSecretaries](https://boards.straightdope.com/u/DeadTreasSecretaries)\ **Post date:** [November 28, 2021, 4:05am UTC](https://boards.straightdope.com/t/tax-the-richest-loans/955037/4 "2021-11-28T04:05:39Z")
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. ---
**Author:** ![DeadTreasSecretaries](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/deadtreassecretaries/32/4817_2.png) [@DeadTreasSecretaries](https://boards.straightdope.com/u/DeadTreasSecretaries)\ **Post date:** [November 28, 2021, 4:13am UTC](https://boards.straightdope.com/t/tax-the-richest-loans/955037/5 "2021-11-28T04:13:15Z")
> [@Bootb](#): > > Will he balance out his proposal by giving billionaires a tax refund when they pay back a loan? 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. ---
**Author:** ![TheGunIsMightierThanThePen](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/thegunismightierthanthepen/32/2981_2.png) [@TheGunIsMightierThanThePen](https://boards.straightdope.com/u/TheGunIsMightierThanThePen)\ **Post date:** [November 28, 2021, 4:43am UTC](https://boards.straightdope.com/t/tax-the-richest-loans/955037/6 "2021-11-28T04:43:06Z")
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](https://boards.straightdope.com/t/democrats-want-to-have-a-billionaire-non-income-tax/953260/7). 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. ---
**Author:** ![McCaff](https://avatars.discourse-cdn.com/v4/letter/m/848f3c/32.png) [@McCaff](https://boards.straightdope.com/u/McCaff)\ **Post date:** [November 28, 2021, 5:46pm UTC](https://boards.straightdope.com/t/tax-the-richest-loans/955037/7 "2021-11-28T17:46:44Z")
So, long term investments would be taxed as though inflation did not exist? Good luck with that, twice over. ---
**Author:** ![DeadTreasSecretaries](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/deadtreassecretaries/32/4817_2.png) [@DeadTreasSecretaries](https://boards.straightdope.com/u/DeadTreasSecretaries)\ **Post date:** [November 29, 2021, 4:27am UTC](https://boards.straightdope.com/t/tax-the-richest-loans/955037/8 "2021-11-29T04:27:52Z")
> [@McCaff](#): > > So, long term investments would be taxed as though inflation did not exist? No? Why would this happen?