21 May 2025 - pinaki
I am not an economist, or an activist. I am a computer researcher who loves thinking about puzzles. I do not care about politics, so don’t confuse it with politics (especially left or right).
This tax reform introduces a clear and enforceable framework to ensure that capital is taxed only when it is economically accessed, not simply when it appreciates on paper. Under this system, taxation is triggered in just two cases: when an asset is sold, or when a loan is taken against that asset and the loan amount exceeds the original cost basis. There is no tax on unrealized gains, preserving incentives for long-term investment and innovation. However, once an investor chooses to monetise their wealth — either through liquidation or borrowing — a tax is fairly applied.
When borrowing occurs, the taxable amount is calculated as the loan amount minus the original cost basis and any previously taxed gain. A flat 30% tax is withheld at the source, ensuring that no additional cash burden falls on the borrower at the time of the transaction. Valuation responsibility lies with the lender, who already has strong commercial incentives to assess collateral accurately. This approach eliminates the need for government-conducted valuations and simplifies administration (intuitively as simple as PAYE).
The system also addresses the long-standing “buy, borrow, die” loophole, where wealthy individuals extract tax-free liquidity for decades and pass on appreciated assets without ever paying capital gains taxes. Under this reform, any economic access to capital triggers taxation, preventing indefinite deferral while still preserving flexibility and choice for asset holders. Importantly, if an asset later loses value, no refund is issued — just as there are no retroactive tax adjustments for lost jobs or declining wages of employees.
To ease implementation and avoid political resistance, optional phase-ins may be introduced. For instance, loans under a certain annual threshold could be exempt in the early years, or the policy could apply initially only to individuals and entities with significant net worth. This system maintains fairness, discourages abuse, and aligns taxation with real economic activity — ensuring the tax code rewards investment while closing avenues for unproductive tax avoidance.