Comment by andoando
6 days ago
Most of the wealth being in stock is really tricky. You can't really tax stock ownership, but at the same time stock can be leveraged against business deals (Musk for example bought Twitter with largely stock, without having to sell it first and therefore being subject to tax), and you can take out loans with stock as collateral.
It's not that tricky. All you have to do is make it a taxable event to collateralize stock.
Should we similarly tax collateralizing real estate as in home equity loans?
Sure, if you exclude primary residence. We aren't trying to fuck with the middle class, just the uberwealthy. I'd be fine with only taxing collateralized stock on people with over $20M in net worth too. We just don't need to provide tax breaks to the rich to make them more rich.
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When the amount of equity pulled out from the loan exceeds the cost basis, why not?
How? That makes little sense to me from an implementation standpoint.
When I bought my home I had to sell $XXX,XXX of stock to make the down payment. If Jeff Bezos wants to buy the same house, he would use a line of credit from the bank, collateralized by his Amazon shares (or whatever source of wealth) and pay with that. I paid 15% in long-term capital gains, he pays 0%. Under my plan, he would pay 15% LTCG for collateralizing his stock,. If I had to pay it, then it's entirely fair and reasonable that we expect him to pay his fair share too.
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If I get something of worth, non-related to the stock/ownership, for the current value on my stock/ownership, I should pay taxes on that amount. I am using the stocks value to gain something. If I take out a loan for businesses needs, that is in the interest of the thing I own. If I take out a loan to buy a separate thing, I have leveraged the current value and have therefor realized the current value and should pay accordingly.
Lenders would have to report loan origination for secured loans where some specific asset classes are acting as the collateral.
Why does it matter? It eventually gets taxed through estate tax and at a higher rate than income. This obsession with taxing them _now_ only makes sense if the point is to punish the the rich.