What is the loophole? That banks are allowed to give out loans to trusted clients? Are you proposing that banks can no longer loan to rich people or what? Why does the source of the collateral being a stock matter? A normal person gets a loan based on his home value, assets, other factors, all of which might appreciate faster than the interest rate. When does it become a loophole?

You really don't want loans to be taxed as income, that would cause a lot worse problems than rich people existing...

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dwa3592 2 hours ago | parent [-]

Let me simplify it like i would for a 5 year old.

The loophole is that they never pay taxes on the unrealized gains bc they lived on the borrowed money their whole life. They will never sell their stocks, so there will be no taxable event. When they die they will leave their wealth to the children which effectively erases the unrealized gains. So no one pays taxes on that huge chunk of money. Google "buy,borrow,die".

	▲	smallmancontrov an hour ago \| parent [-]
		Yes, but that's only the long term part of the plan. The short term part of the plan is that the marginal propensity to consume drops with income. Poor people earn and spend all their money, both of which are heavily taxed, while rich people "earn" capital gains and invest all their money, neither of which are taxed. Here's how investment isn't taxed: take out a loan collateralized against the assets with unrealized gains. If the investment works, it can service its own interest, which is deductible. If it doesn't, the capital loss offsets the capital gain made by selling the collateral. Both cases result in approximately zero tax. This is nuts.