I never understood the issue. You borrow money against your equity, but have to pay it back, with post tax dollars. Plus you pay interest on it anyway. So where it the loophole.<p>Simplified example, I have $100 worth of stock, I borrow $10 and pay 10% interest. I eventually have to come up with the $10 to pay it back, which will be post tax. And I'm paying interest on it anyway, which may or may not be tax deductible.<p>It would be the equivalent of me getting a home equity loan and having to pay taxes on the gains of my property when I took out the home equity loan.<p>What am I missing?
The loophole appears to be the reduction/elimination of taxes at death, not the common equity loan that middle class folks take advantage of as well.
Unless I've missed it, this analysis skipped over the flexibility of being able to declare which specific assets are functioning as collateral through adding new terms to loans. This would lower compliance costs further without being beholden to all the fixed rules they laid out (eg "FIFO").<p>For example if you're taking a huge loan above the thresholds, instead of just implicitly having that loan backed by everything you own, the terms can spell out which specific assets are functioning as collateral and that there is no recourse against you generally. Then only the gains on those recourse assets would be considered.<p>(Though this whole topic might be a moot point now that interest rates exist again, and if the ZIRP monster is allowed to come back then we're screwed anyway)
This sounds like a great proposal. Another consideration is to means-test the step-up basis the estate up to a certain size.<p>It would certainly be harder to comply with but both together seem like a no-brainer. These people need to pay their fair share.
We already have laws for tax treatment of constructive sales of assets. Using an asset as collateral would be a logical extension of that principle. This seems more workable than unrealized gains taxes in general.
Is it a loophole? There's only a very small cabal of high priests who actually understand how the tax system works and uncle Sam isn't paying as much as the billionaires and corporations. I assume it was all deliberate.
Ah yes, let's become even <i>more dependent</i> on the rich, this will fix our problems.<p>If you want to transfer their wealth, then just transfer their wealth and be done with it and declare nobody can ever be a billionaire or whatever. That's actually at least sane.<p>Otherwise this (and many like it) is a dumb plan because it will make you more dependent on them, when<p>1. it seems nobody wants them to really exist in the first place, and we want to eliminate them - see below.<p>2. If you <i>don't</i> eliminate them, you are becoming more and more dependent on a smaller and smaller group over time. Ignoring the totally obvious problems with this, it doesn't work anyway. People don't want them to have any more political or other power than anyone else, but this is totally unrealistic if the vast majority of your funding ends up depending on them. Like, good luck with that i guess?<p>It's also unreasonable anyway, the 5% partner in a 2 person small business does not get 50% of the say. It's only because of the amount of class warfare involved that anyone considers this position sane. If you don't want rich people to have power, stop depending on them. This is not different than anything else in the world (if you don't want Amazon to have power, stop depending on Amazon)<p>If you do eliminate billionaires, now your plan is basically:<p>1. Heavily tax billionaires to the point that majority of tax revenue is dependent on them<p>2. Get rid of billionaires at some point.<p>3. ????<p>Governments don't ever save enough money to make themselves self-sustaining without tax/etc revenue, and personally, i do not want a self-sustaining government anyway.<p>So how does this end well, exactly, except in a fairy tale?
Also need to eliminate the immediate tax benefits of deferred donations. The Silicon Valley Community Foundation is 99.9% a tax dodge that shouldn't exist because it does so little meaningful philanthropy compared to how much in tax advantages they launder for billionaires.
Damn, I'm a billionaire and I can't borrow now against my stock. That's a shame. Maybe I should borrow in Ireland? Or Barbados? Just a thought.