>> In my opinion, do away with income and capital gains tax and have a pure consumption tax instead. Want a lavish lifestyle? Then you will pay higher taxes.

I hold a similar view. Why should someone pay more taxes just because they earn more.

Taxes should include a 'constant' term for benefit that everyone in the society is reaping (e.g., security, public infrastructure and facilities, etc.). There can also be terms proportional to the spendings/lifestyle (i.e., sales tax) and even income, when again the government is introducing some benefit per sale or money earned.

The prime purpose for governments, and thereby enforced taxes should be to pay for things needed that no one individually will otherwise pay for but which the society as a whole needs. An an example, pollution hurts everyone, yet, no particular entity would spend on curbing pollution unless done by enforcing at a social level.

Note: If there is no tax whatsoever in earnings, there would also be a need for some additional tax like inheritance tax, which I support, so that people do not just keep on hoarding the earnings without ever spending.

It's much more popular to sell taxes-as-punishment than to propose rational tax policy.

And? What's wrong with that? There's no free lunch there - they still have to pay back the loan. It's not like it's free money.

You don't necessarily have to pay back the loan until your death, then it is taken from the estate and the balance passed on to heirs. At that point the step up basis occurs and the process starts over again. No taxes were paid on the value of the loan. (Correct me if wrong on this)

That’s one of those things that seems too dumb to possibly be true, but it looks like it is? An estate can sell stocks in probate with cost basis set to date of death, not purchase? Sort of makes sense, the heirs would get the stepped-up basis, the stocks, and the debt if the executor didn’t net them out in probate.

I guess it’s a bet you’ll be dead before the interest outweighs the potential tax, or volatility spikes? Betting on your own death seems to macabre, and too tempting too the fates.

You pay off the interest with the 40k of equities you can liquidate in 0% capital gains bracket, per year.

And yes, a bet that interest rates will remain below effective tax beyond that.

For ultra-high net worth individuals it's a pretty safe strategy. Typically a low volatility equity that doesn't pay dividends is used and only a small percentage of their portfolio is used.

Over the long run it tends to work in their favour as well, since it's very likely that the increase in the portfolio value will outpace the interest paid.

> increase in the portfolio value will outpace the interest paid

Ah, right. Caught me twice on my fixed-pie thinking :)

No tax perhaps, but interest has to be paid.

Of course, in a ZIRP fantasyland the interest is negligible.

If the choice is 40% tax or 2% interest...

I mean, long term rate is 20%, so taking a margin loan at 2% to finance consumption is a bet that you have less than 10 years to go…

That's assuming the asset that would've been sold doesn't increase in value. It's likely that the asset will increase in value more than the cost of the loan.

You are conflating assets and liabilities. Are you really suggesting people pay taxes on their liabilities?

That would be insane.

Loans still have to be paid back with cash plus interest. It can give wealthy people some leverage to make their tax payments more efficient in that they can spread their payments over time or wait for a down year, to liquidate a chunk of assets to pay down debt so they never have a bulge in realized income. But there is still a cost in terms of debt service that make this have limited value. It's not like loans are free money.

>In my opinion, do away with income and capital gains tax and have a pure consumption tax instead.

That turns out to be incredibly regressive as the poor spend almost all of their income, where as the rich spend a fraction of a percent.

So you end up with them paying even less, and the worker paying far more. It's called a "flat tax" and it's a horrible idea.

Hurts the 99% far more. 5% when you can barely afford food makes a difference, not so much on your newest mega yacht.