[a_c_s]

Getting a loan against assets is another way of "using" it, so why not make that a taxable event?

Just like now your stock value would not be taxed while it is invested. But now it would be taxed if you use it as collateral for anything. If you don't want to pay capital gains by selling the underlying stock then you can just get a bigger loan and pay the taxes out of that.

There, now you don't have to liquidate but the taxpayers benefit too when the wealth is "used" by the owner.

[lesam]

This still leaves open ‘buy, don’t borrow, die’ as a way for the dynastically wealthy to opt out of paying capital gains tax.

I think the sensible option is making death a taxable event, rather than borrowing (with perhaps exceptions for the family farm, but not for the family billion dollar business).

And the second best solution is eliminating the step-up basis, which without deemed disposition at death is just a free gift of capital gains tax rebates to heirs of the most wealthy.

[eli]

Or another way to think of it: your estate has to settle all outstanding tax bills after your death, including the gains in assets that have remained untaxes your whole life.

[a_c_s]

Death already is a taxable event though?

[nemothekid]

Only issue I can forsee is that every loan, except a credit card, personal loan, and student loan, is typically loaned against an asset. I guess you could make carve outs for mortgages and auto loans.

[kemitche]

Why would there need to be a carve out for home/auto loans?

1. No one really borrows against the value of their (paid off) car. 2. Property taxes already, generally, are against the assessed value of the home, so it's already happening for that case. There are some minimal exceptions, like CA Prop 13, of course, but generally speaking, if I want to take out a second mortgage or something, my home's value is already appropriately "stepped up."

[nemothekid]

I guess I'm not sure how this mechanism would work without being abused. I assumed when I take out a car loan, the bank is giving me money, in which the collateral is the car or home.

But I now assume the tax would be on the assessed change value of the asset, for which a new car or home would be 0, so no tax.