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Why are tax brackets the value they are? Would you say that tax brackets are a bad system? They also rely on an arbitrary use-agnostic choice of value.
Same reason taxes are calculated over yearly income and not every 2 years or 6 months. It's also arbitrary, it's just an arbitrary you're used to so you don't question it.
Both cons you found for my solution are also present on tax brackets, i.e. arbitrarily defined values and length, by that logic you also think tax brackets are a bad idea.
The reason why I said 10 Mil over 5 years is to try to exclude as many legitimate use cases as possible. For starters we're talking about people, not business, there are legitimate reasons for a business, particularly large ones, to take much larger loans. But for people? The largest expense on a regular person's life will be the house they buy, and 10 Mil is WAY above the average price for that, if someone is buying a >10 Mil house I'm okay with them getting taxed on the loan, if they managed to get a 40 year 0% loan (impossible) they'll already be paying 20k per month, might as well pay some more on top of it. But wait, you might say, what about smaller loans that compound to >10 Mil, that's why there's a 5 year limit, this means the person needs to loan over 2 Mil per year, which is simply not possible for someone unless they're mega-rich, because again they would need to be paying >20k per month.
And yes, those are arbitrary values and probably they need adjusting via research and experimentation, but again the same is true for tax brackets, and I think everyone agrees those are a good idea.
This answer you acknowledged my proposal, therefore I now believe that you understood it, on your first answer you suggested I had a definition of income/non-income loans, which is not at all what I'm proposing.
Ok, I'm just going to go ahead and pitch an alternative and then you can weigh in on the relative merits.
In my mind, the issues aren't the loans themselves, it's that they're secured by shares. Billionaires are able to realize real value from those shares without paying taxes in them.
I think if you want to use shares as collateral, you need to pay the taxes on them.
You wanna use shares to back a loan, fine, but the instant you do, all taxes on those shares are due at FMV.
This isn't without precedent: when an employee has unvested shares with a company and meet a companies retirement eligibility criteria, the IRS sees that those shares are "no longer at substantial risk of forfeiture" and several social taxes are due, despite the shares not being sold or even technically owned by that person.
We can extract fair tax values from securities even before they're sold. We already do.
Tax the assets used to secure the loans and it gets the taxes into the system without removing voting rights. Win/win, and it's a scalpel directly targeting the root.