No, I'm saying that they wouldn't bankrupt themselves. They would realize assets (or take income) to pay off the loan, and that's when they would get taxed. The story that rich people don't pay taxes because they just take out loans and never sell the assets doesn't make sense to me for that reason.
Comments
Govt doesn’t get any money from the interest paid. The underlying asset can eventually be sent offshore, put in trust or whatever, and never be taxed.
If the underlying asset goes away and never gets realized then where does the money to pay back the loan come from?
So you're saying that they'd bankrupt themselves, rather than pay off the loan?
And i'm sure the banks lending out the money will want to have a way to hold on to the collateral.
No, I'm saying that they wouldn't bankrupt themselves. They would realize assets (or take income) to pay off the loan, and that's when they would get taxed. The story that rich people don't pay taxes because they just take out loans and never sell the assets doesn't make sense to me for that reason.
of course they do - these interest payment isn't investment cost that can be claimed.
And the interest payment is profit to the banks/lender, and thus, they pay tax on profits (less expenses).