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So, viewing such a thing being possible as a problem, what kind of "fix" to the tax rules is best? Prioritize taxes on spending instead of income? Sales taxes

So, viewing such a thing being possible as a problem, what kind of "fix" to the tax rules is best? Prioritize taxes on spending instead of income? Sales taxes are usually regressive (people with less wealth/income spend a larger proportion of their wealth/income each year, AND they tend to spend it less on things that aren't sales-taxed like real estate, services, financial instruments, travel abroad, political lobbying). Spending also tends to be more sensitive to economic downturns than income, tightening government revenue when it often is needed the most. Maybe a separate expenditure tax that only applies to spending significantly more than you earn (and so is only collected from the wealthy)? Maybe something like... treating unrealized gains as realized when taking out debt? The problem is that if you have a $1 million trust that appreciates $40,000/yr, you "have" that money, but to actually _have_ that money costs you a taxation event, yet lenders don't really care about the difference between "having" and _having_ when there's so much extra collateral.

noduerme 5y ago
What about taxing lenders when they take loans against non physical collateral? i.e. something that's not a house, car or otherwise utilitarian infrastructure. Let them pass the tax on in rate hikes until it equals the capital gains tax. Just a spitball idea.
novok 5y ago
They could... charge the cap gains tax to the estate, getting rid of a big point of the strategy? The estate not having to pay cap gains on their gains is the big kicker and essentially arbitrary. If the person 1 month before they died sold a bunch of wealth to settle all of their debts, they would pay cap gains tax. But after their death, you do the same thing with their estate and they dont pay cap gains tax from gains before their death? It's a bit absurd.
- fighterpilot 5y ago
  They should not charge cap gains on the estate, since that'll force sales of illiquid assets which is not good. They just have to not allow the resetting of the cost basis of the assets. It's a very simple fix.
  - novok 5y ago
    I was more implying when the estate sells something, you charge the original basis of cap gains tax when they try to pay off its debts by liquidating, but illiquid forced asset sale issue is also a good point.

noduerme 5y ago

What about taxing lenders when they take loans against non physical collateral? i.e. something that's not a house, car or otherwise utilitarian infrastructure. Let them pass the tax on in rate hikes until it equals the capital gains tax. Just a spitball idea.

novok 5y ago

They could... charge the cap gains tax to the estate, getting rid of a big point of the strategy? The estate not having to pay cap gains on their gains is the big kicker and essentially arbitrary. If the person 1 month before they died sold a bunch of wealth to settle all of their debts, they would pay cap gains tax. But after their death, you do the same thing with their estate and they dont pay cap gains tax from gains before their death? It's a bit absurd.

fighterpilot 5y ago
They should not charge cap gains on the estate, since that'll force sales of illiquid assets which is not good. They just have to not allow the resetting of the cost basis of the assets. It's a very simple fix.
- novok 5y ago
  I was more implying when the estate sells something, you charge the original basis of cap gains tax when they try to pay off its debts by liquidating, but illiquid forced asset sale issue is also a good point.