Comment by sarchertech
6 months ago
Have you taken out a secured loan in the last year over x amount?
Take the value of the asset assessed by the bank and the price paid for the asset to find the total value that is unrealized gain.
Divide that by the total value to get percent of collateral that is unrealized gain. Multiply that by the loan value. Then multiply that by the tax percentage.
All you need is for banks to report secured loans to the IRS and it’s easy.
Secured loans of that form are easy, sure.
But if those skyrocket in price from tax, they'll be more subtle about convincing banks they're good for the money and pay a slightly higher rate for unsecured loans.
Or maybe they'll just treat the asset securing the loan as having the pre-gains price. Get the bank to agree it's worth at least what you paid, with no further analysis.
If you try to plug those loopholes you lose the "much easier to do because there is no disputing the assessment since the person implicitly agrees to the valuation" factor.
>treat the asset securing the loan as having the pre-gains price
That’s no different than if the asset had no unrealized gain at all.
>they’ll be more subtle
It only takes a small rise in interest rates before it’s cheaper to pay the tax—assuming the tax isn’t outrageous.
Unsecured are much riskier because of the way unsecured creditors are treated in bankruptcy, so they already have higher interest rates.
It would be very easy to tweak bankruptcy laws to make unsecured loans over a certain amount a bit riskier to increase the delta even more.
We also already have regulations governing how banks assess creditworthiness, and the percent of their capital they can lend unsecured based on risk. As well as the amount of unsecured loans they can make to signal individual. If necessary tweak those values.
Another easy way is to add a surcharge to large unsecured loans where the loan amount exceeds the taxpayer’s assets based on acquisition price by some large margin.
None of those impact implicitly agreeing to the valuation and they are all pretty easy to do.
> That’s no different than if the asset had no unrealized gain at all.
It lets you get loans based on 100% of your pre-gain money with zero taxes paid, which I think is too generous. You wouldn't do that if it was actually all your money. It mostly fits the idea of only taxing the "used" money, but not entirely, and I don't really favor that idea in the first place.
> It only takes a small rise in interest rates before it’s cheaper to pay the tax—assuming the tax isn’t outrageous.
15% tax is pretty big. And if we put capital gains back in line with income tax it would be double that.
> Unsecured are much riskier because of the way unsecured creditors are treated in bankruptcy, so they already have higher interest rates.
If the unsecured loans only go up to 90% of the post-gain asset value, that's not much riskier, is it?
> We also already have regulations governing how banks assess creditworthiness, and the percent of their capital they can lend unsecured based on risk. As well as the amount of unsecured loans they can make to signal individual. If necessary tweak those values.
Yeah okay we could stop unsecured loans from happening. That seems awkward though.
> Another easy way is to add a surcharge to large unsecured loans where the loan amount exceeds the taxpayer’s assets based on acquisition price by some large margin.
I don't like this one at all.
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