CMV: If corporate stocks can be used as collateral for bank loans, they should be taxed like any other form of property

Property taxes are levied by the state that you’re in, and states are responsible for Heath, Education, Safety, Transportation and all other rights not enumerated to the federal government. If you own property, your property taxes will fund the schools, and emergency services that protect you and your property. If you own a car, those fees will go to maintaining the roads.

Stocks are not physically located in a state jurisdiction, so they don’t trigger state laws.

For federal purposes, we don’t have a federal property tax, only an income tax. It doesn’t make sense to charge you tax every year on your unrealized gain or loss because the cash to pay the tax is in the investment. It would force you to realize it in order to pay the tax.

Loans represent cash that you’re borrowing, so technically you haven’t earned income because you’ll be paying it back. Technically, the bank already pay the tax on it. You would have to pay interest, but that goes to the bank (the bank would pay tax on the interest income though).

It’s a loophole for sure, although I would really not like to have to pay an income tax, a state property tax, a state sales tax, and add on another federal property tax. I think a better alternative might be to have regulations that tax loans in certain situations where it’s pretty clearly a tax shelter.

/r/changemyview Thread