> Well, one workaround would be to treat securitization of shares (eg for a loan) as a taxable event. This is a common (and currently legal) tax avoidance strategy.
I suspect it would be harder to stop this strategy than it might seem, because someone could happen to make me a large personal loan at a low interest rate when I happened to have a large portfolio with them. If the numbers are big enough, it makes sense to do.
If you treated all loans as income, but got a deduction for making payments... Maybe you could make it work. Although, that's kind of rough for mortgage and auto loans.
Mortgage and auto loans are usually cash secured, so there are no gains to realize. This tax treatment could (I would say should) only apply to e.g. shares on the difference between the cost basis and amount used to collateralize the loan.
One quirk of that is that regular Joe could then get a loan against their cost basis in their portfolio and still have no taxes. E.g. they bought 10shares of $X at $100 and now it’s $200. A loan secured against those shares would not be taxable up to $1000 and the portion between $1000 and $2000 would be taxable. This still stops mega billionaires from never paying taxes because the cost bases on their shares are usually very low.
I suspect it would be harder to stop this strategy than it might seem, because someone could happen to make me a large personal loan at a low interest rate when I happened to have a large portfolio with them. If the numbers are big enough, it makes sense to do.
If you treated all loans as income, but got a deduction for making payments... Maybe you could make it work. Although, that's kind of rough for mortgage and auto loans.