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If a loan is acting as income (like it does for the ultra wealthy) then it should be treated like income and taxed accordingly.
And what exactly is the difference between a loan and a loan acting as income?
Those loans are often several times more than the yearly income and done more frequently.
You don't have to repay income. When you repay the loan should you get the tax back?
The loan was used to evade taxes. Those loans on stocks are effectively turning their stocks into gains and should be taxed as such.
How do you establish that a loan is or isn't "acting as income"?
Those loans are often several times more than the yearly income and done more frequently.
My mortgage was many times my yearly income.
So then you just have frequency, which is easily gamed by getting fewer larger loans. Maybe one every three to five years? At that point it really is just a mortgage with stock as collateral rather than a house.
Like, you're not wrong in your intuition that the system is problematic. Mine (and others) point is that the devil is in the details, and they're not trivial.
But then the value goes WAAY up. Let's assume you live in a very good house, and mortgage it you're able to get 5 million out of it. Do you think someone like Jeff Bezos could live for 5 years with that?. You can do it fairly straightforward, everytime you take a loan, the full amount of that loan gets added, after a period of 5 years that value disappears, if at any point that value goes above 10 million, you start paying taxes on it. And the higher it goes the more tax you pay on it, just like how income tax has brackets, and just like how up to certain values are exempt.
For you or me if we were ever loan 10 million over 5 years we wouldn't have a way to pay it back. For an Uber wealthy they do that fairly quickly, Bezos mention costs 600k a month, so he'll get into the first bracket from just that in a year and a half.
People need to realize just how big the gap is, there are plenty of ways to tax extremely rich people without affecting the middle class by just putting the bracket so high up that it's impossible for a middle class to reach it.
The problem isn't that i "don't understand the gap". The problem is that this isn't what I'm asking.
How do you define for the purposes of this hypothetical law which loans would be taxed as income?
Telling me how rich Bezos is is completely tangential.
I've been trying to use the Socratic method to prime the pump that
-The root of the problem isn't the loans themselves, it's that they can "realize value" from shares (using them to secure a loan) without selling them.
But that doesn't seem to have gotten anywhere because of how excited people are to hear any question to be somehow a doubting of how rich these guys are?
If that is the case, and you step back, can you consider an alternative strategy besides just some messy spaghetti definition of "income loans" vs other loans?
Read my answer before replying, I provided a solution for that's and it's a solution based on the astonishing difference between what high middle class people and super rich make.
I'll repeat it, every dollar you take from a loan gets tallied, and expires after 5 years. Whenever that value goes beyond 10 million you start paying taxes on the loans. You, or any high middle class person, won't be able to take that many loans in such a short period of time, simply because it would mean that you need at least an income of 2 million per year just to repay those loans, and I think we can agree that's not high middle class.
This way there's no loophole on the type of loan.
This is a bad system for several reasons:
-It requires an arbitrary use-agnostic choice of value. Why 10 million? Why not 5? Why not 50?
-it requires an arbitrary time scale. Why 5 years? Why not 3? why not 10? Why not limit once in a lifetime?
We're defining a system here with numbers out of thin air with no context around anything. These are fundamentally badly designed systems. No amount of fiddling with the parameters will make up for the fact that it's fundamentally flawed.
Also, beyond that, you would be amazed how many scenarios exist for people and businesses to secure large loans that this would impact. The goal is to actually tax the super rich who are dodging taxes, not kneecap legitimate useage. You'd hurt hundreds of thousands legitimate borrowers and just shove Bezos and Musk into using alternative mechanisms to leverage their security holdings.
I know you think I don't understand your proposal. I challenge you to consider that I do, and still think you can reconsider the root cause of the issue and come up with alternative ideas. You're stuck on the loan aspect. That's a symptom, not the cause.