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This is not a loophole. Collateralizing a loan against assets does not produce income. It produces cash and an even larger liability. That loan still has to be
by bananabreakfast 5y ago
This is not a loophole. Collateralizing a loan against assets does not produce income. It produces cash and an even larger liability.
That loan still has to be paid off with separate, regularly taxed, income.
Also this is a strategy used all the time by the 99%. It's called a second mortgage. This proposal would mean that taking out a loan against the equity in a home would become a taxable event.
- bryanlarsen 5y agoOf course it's a loophole. Elon Musk takes essentially no salary, never sells his shares yet lives the life of a workaholic billionaire. The only reason he has any taxes at all is because he is taxed on his stock grants. He also has > $1B in debt. The first $500K in residential capital gains aren't taxable. I sure hope your second mortgage is less than that. Taxing the securitization of assets should cause a step up in the base cost of the asset. So it doesn't reduce the amount of tax you owe, it just changes when you owe it. (Unless you avoid the tax by dying).
- ethbr0 5y agoI don't think anyone's arguing people should be taxed twice. What they are arguing is that individuals should be taxed at the event of first utility (that is, realizing value from the gains). And then the tax is paid, so not paid again, or offset, later. And what we're really talking about here is individuals using equity loans for the majority of their income.