We know that no companies pay tax (ignore the billions paid in tax), and no rich people pay tax (ignore the billions paid in tax), so therefor all taxes must be paid by me personally.
Or so the arguments go.
Reed Hastings would currently being losing a lot under this scheme.
But I think now I've been able to work it out. There's actually two different types of loans but we treat them equally. The first is the nice type, the 'I built a factory, used that factory to pay back the loan with interest', that loan is a positive sum loan, the company wins, the bank wins, and the community wins. The second are loans for land, loans for stock, and other similar loans - these are zero-sum loans. The company can win, the bank can win, but someone is losing, and as is the community.
And so the real problem with this if you track how the money flows - a possible scenario is that a company might take out a bond, use the money for that bond to buy its own stock. The people who sold that stock and got that money might then go out and buy a house, the people who sold that house - you betcha, put that stock into an index fund, which includes a larger and larger share of the companies buying their own shares. Now that their share price is raised, they have more equity, and can once again take out another bond to do it again. It's a positive feedback loop. Each cycle is inflating the bubble. Valuations end up not being based on actual productivity, but on assumptions as to how money will flow through the markets.
We're at a stage now that the stock market flows of funds is only positive because of the stock buybacks. Companies that aren't buying back their stocks are going out of business. The Russel 5000 is getting punished despite the s&p recovering. We're at a stage now where north of 40% of all money is being held behind passive flows. We're now seeing the consequences of that with things like Netflix - when the stock does drop, it drops quickly and massively. Average volatility might be down considerably, but peak volatility is up massively.
Why is that?
A proposal to correct this is to require that when you use an asset as collateral for a loan you have to reassess its value and pay capital gains taxes on the increased basis between when you acquired it and took out the loan.
Basically there needs to be friction and taxation with equity transactions like these loans.
If the interest paid is tax deductible, then the selling of the stock won't result in a tax needing to be paid.
Once you upgrade your brokerage account to include margin loans you're allowed to borrow up to, say, 40% of the value of your stock (I simplify, the exact rate is dynamic).
Say you have $1 million in stock.
You're allowed to borrow up to $400k. You have a line of credit of $400k.
Say you borrow $100k. And in this context "borrowing" is simply transferring money from your brokerage account to your bank account. There's no additional paperwork as in most loans.
Let's say over 5 years you accumulate $10k interest (interest rates are really low, can be below 2% right now).
You don't have to "repay" that $10k or the principal. You now owe $110k which is well below $400k limit.
It's a line of credit, you can still borrow additional $290k.
In the limit that line of credit would only have to be settled when you die.