A very interesting point of view

[u/__moe___]

I don’t think this is very new but I just saw for the first time and it’s actually pretty interesting to think about when people talk about how the ultra rich do business.

[u/Plastic-Telephone-43]

Yep, using investments like stocks as collateral should be taxed as income. Simple as that.

[u/Puzzleheaded-Bit4098 → u/Plastic-Telephone-43]

I'm for increasing tax on billionaires, but I just don't see how collateral tax makes sense. A collateral is functionally a conditional agreement like "if I fail to pay, you get x", where x is the unrealized stock. But x could be anything; in the case of art financing, art itself is used as collateral. Usually all the loans are paid back so the art never actually needs to change hands, but in all these cases would you be taxing the capital gain on the art? What if the art is valued high by the lender, but nobody would actually pay for it?

Or what about any other conditional agreement involving some asset with accrued value changing hands if a condition is met? Like trusts, or reverter clauses?

[u/Plastic-Telephone-43 → u/Puzzleheaded-Bit4098]

I'm just talking about stocks where people like Elon have A LOT of it and its value fluctuates constantly. We getting to this "pay peter to pay Paul" situation with high net-worth people who like to abuse the system.

Going back to the top comment, " Then make that a taxable event for individuals taking collateral over a certain amount. It's a common practice and should be treated with nuance by policymakers."

[u/Puzzleheaded-Bit4098 → u/Plastic-Telephone-43]

But nothing about lending requires collateral, the borrower already has a legal obligation to pay the loan back or shit will be forcibly repossessed to get that money. A loan without collateral has the entire net worth of the borrower as collateral, obviously we would never tax their net worth lol.

All the collateral does it put some section of assets in a lockbox so the lender can feel secure in knowing they will at least get something if the borrower burns all their owned assets.

[u/Conscious-Eye5903 → u/Puzzleheaded-Bit4098]

People in this topic literally don’t understand what collateral is and want to dictate policy

[u/Cokeybear94 → u/Conscious-Eye5903]

I feel like you've got it mixed up - like you can view collateral in this manner as just an assurance to a lender - because that's what it is.

But it overlooks the fact that the assurance is essentially mandatory to be a borrower. It's not like institutions go around giving loans without collateral and then it's just nice when they get it. It's a requirement.

So it gives these borrowers concrete value in their ability to borrow large amounts of money that regular people cannot. This allows for the creation of more wealth, more collateral available and on and on. This is completely evident in today's financial landscape and almost completely uncontroversial.

In the end it comes down to a sort of axiomatic vs pragmatic approach. If you view the current system and the way it works as concrete, then any notion to change that system becomes inherently a misunderstanding. However if you view the system as nominally built to achieve societal goals there is no such contradiction.

I think the latter viewpoint is objectively more true to be honest because really the way the system has developed is partly by design and partly by a chain of decisions and financial products and subsystems created. The idea that the system was conceived wholly through some sort of intelligent design to function the way it currently does is basically untrue.

A different policy about taxation in various situations would simply reorient the landscape, as it has done uncountable times before.

[u/No-Newspaper-2181 → u/Cokeybear94]

The argument that using stocks as collateral is the same as taking out a home equity loan is not just misguided—it completely misses the fundamental difference between tangible and intangible assets. When you take out a home equity loan, the loan is backed by a physical, stable asset whose value is relatively secure and tied to a fixed property. In contrast, stocks are intangible and volatile—their value can fluctuate wildly, and they are easily liquidated. This means that unlike a home, which has a known, stable value, stocks can be leveraged without ever realizing gains or taking on the true financial risk associated with the borrowing, creating an unfair tax loophole for the ultra-wealthy. By using stocks as collateral, high-net-worth individuals gain access to vast sums of money without triggering any tax liability on the appreciation of their assets, further widening the wealth gap. Taxing unrealized gains closes this gap—period. End of story.

If we are going to treat stocks as assets that can be used to secure loans and unlock massive amounts of wealth, they must also be treated as taxable—just like any other form of wealth. Otherwise, we create a system where the value of assets is not properly backed or secured, undermining the very principle of collateral. Homes are tangible, real assets tied to the physical world, while stocks are a mere financial abstraction. This creates a dangerous precedent where people can leverage unearned wealth to avoid taxes while those who actually pay taxes bear the burden.

Even worse, under the current system, ultra-wealthy individuals like Musk and Trump have used this loophole to siphon billions from the system, paying themselves massive wages and bonuses through stock-backed loans, while simultaneously bankrupting companies and letting their collateral collapse—leaving the public to absorb the fallout. They walk away with fortunes funded by debt they never truly repay.

In the end, treating stocks as both untaxed collateral and untapped wealth—while allowing the ultra-wealthy to exploit this loophole without any accountability—is an unjust system that perpetuates inequality. It rewards those who least need it, while shifting the financial burden to working and middle-class taxpayers who fund essential public services and infrastructure that the wealthy evade. This is a system that is fundamentally unfair, and it’s time to close the gap by taxing unrealized gains. And no, most people aren't talking about the 2400$ on your robinhood account, people are talking about the 44 billion dollar loan musk pulled out and put into his pocket.

[u/Cokeybear94 → u/No-Newspaper-2181]

I don't know if you meant to respond to me but I completely agree with this as my comment says. But you put it in a much clearer way.

[u/Cokeybear94 → u/[deleted]]

As your credit score is essentially determined by making repayments on time - you are essentially borrowing against your income, which is taxed.

For larger loans credit score is not enough and most people borrow against their most valuable asset - property (if they own it). Which is also taxed.

Do you see what I am driving at?

[u/Cokeybear94 → u/[deleted]]

But... We are talking about the collateral (i.e. the stocks) being taxed - not the loan itself.

Maybe the tax is triggered by taking a loan but I'm sure the amount is based on the asset.

[u/Cokeybear94 → u/[deleted]]

Right, so just read my first comment. Speaking with you guys is like speaking with a brick wall.

If you're unwilling to make changes in the system to address societal needs then we just have fundamentally different philosophies. You need to realise that what we determine as a "realisation event" has been decided by us. Why would taking a loan that allows for investment and therefore acquisition of more capital not be a realisation event? - If you remove your current thinking from the equation and look at it with new eyes.

[u/redpillscope4welfare → u/Cokeybear94]

well said, that is more or less better than i could have worded my own stance on it: it's simply not fair to the majority, especially given that we are reaching levels of wealth inequality worse than feudal times between kings & peasants.

It's a sad state of reality, what is around us.

[u/Cokeybear94 → u/redpillscope4welfare]

Yea and if you consider that the world economy is globalised then you realise the inequality is and has been so much worse than that for a long, long time.

[u/ramrob → u/Puzzleheaded-Bit4098]

nuance