You are ignoring the most common approach, borrow against the asset. In that case the sufficient assets turn into essentially unlimited untaxed cashflow. Especially with how the market has been lately, the gains erase any burden of the loan. Sounds like a broken tax system to me.

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pj_mukh 4 hours ago | parent | next [-]

So why isn't the suggestion to tax the loan instead of the asset (that is 10x more volatile than say property)?

	▲	14u2c 4 hours ago \| parent [-]
		That may be a perfectly viable solution. Seems like an easier path to me, at least. But the point is that these assets are a lot more fungible than you imply. > It is not a good measure of the money someone may be able to realise. And as such, when you get into the higher ranges, net worth is quite a good indicator.

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throwawayfifo 2 hours ago | parent | prev | next [-]

>into essentially unlimited untaxed cashflow

Loans must be paid back. Loans are cash flow neutral (cash flow negative with interest) over the maturity. That's why loans are not counted as income.

	▲	14u2c 2 hours ago \| parent [-]
		In theory, maybe, but in practice that is not what happened over the past decade(s). Instead our retirement funds are paying it back. When the market grows it makes the collateral worth more, which lets the borrower keep refinancing the debt instead of selling assets and realizing taxable gains. As long as the assets appreciate faster than the debt grows, the borrowing can effectively roll forward for decades. Eventually the estate pays the debt out of the assets themselves, but this is not necessarily out of taxable income earned during the person's lifetime. The US markets has seen exceptional genuine growth, but the trillions of 401(k), IRA, etc money flowing in to them over the last 40 years is no small consideration. And even so, you could say it all settles out in the end, but that ignores the fact that there have constant constant efforts (and successes) in eroding away the e̶s̶t̶a̶t̶e̶ ̶t̶a̶x̶ "death tax" during this same period.

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ndriscoll 4 hours ago | parent | prev [-]

What evidence do you have that people borrow against assets as some tax avoidance strategy? What are the details of this brilliant, often repeated plan? In particular, where do you get interest rates that are low enough to make it worth it to avoid capital gains even with an asset that's grown 100x over its cost basis (and are you accounting for reinvestment of income like dividends that can't indefinitely defer taxes, creating regular tax lots with higher basis that you could sell first)? e.g. are they getting better interest than SOFR somewhere?

	▲	14u2c 2 hours ago \| parent [-]
		The framing was slightly glib, and you're correct that current rates impacts the equation, but there has been real damage caused by how extremely attractive this strategy has been over the past decade. We sitting on an unprecedented peace time deficit due to a failure to properly tax an economy that has been massively prosperous during this same period. This strategy is small part of it, but it is a real part.