By John Q. Hosedrinker 
Congressman Dan Goldman (NY-10) has introduced the ROBINHOOD Act, a bill targeting the ultra-wealthy’s use of borrowing schemes to avoid paying taxes on capital gains. The legislation proposes a 20% excise tax on loans and lines of credit secured by capital assets for high-income earners. This initiative aims to generate at least $276 billion over ten years by making the wealthiest individuals contribute their fair share, with potential revenues earmarked for investments in universal pre-K and childcare programs. The act seeks to address the current tax code’s shortcomings, where the ultra-wealthy are able to avoid taxes while accessing massive sums of money.
Read the original article here
Representative Dan Goldman’s recent proposal to tax the wealthiest Americans on securities-backed loans has sparked a lot of discussion, and it’s easy to see why. The core idea is pretty simple: if you’re taking out a loan using your stocks as collateral, that should be treated as a taxable event, much like selling those stocks and realizing a capital gain.
This makes intuitive sense, doesn’t it? If someone is leveraging their stock portfolio to access cash, they’re essentially converting unrealized gains into spendable money. Yet, until now, this has largely been a tax-free maneuver for the ultra-wealthy. They get to live large without actually selling their assets, avoiding capital gains taxes in the process. This proposed tax aims to address that, leveling the playing field and ensuring the wealthy contribute their fair share.
One of the more straightforward arguments in favor of this is how the tax would work. A 20% tax on these loans feels like a reasonable starting point. It’s not about punishing success; it’s about closing a loophole and making sure everyone plays by the same rules. It also seems like the idea is pretty easy to understand. “Billionaires don’t sell stock to fund their lifestyle, they borrow against assets, and up until now, that borrowed money is tax-free. Since their wealth is growing faster than their spending, they just keep borrowing and live large without ever paying their fair share. A 20% tax on money borrowed in this way addresses that inequality.”
Of course, the debate isn’t without its complexities. Some argue that this could be just a starting point and perhaps ordinary income tax rates should apply to these loans. Others think that a flat tax rate isn’t progressive enough and that there should be a tiered system. However, the core principle remains sound: if you’re using your assets to generate wealth, you should be contributing to the tax base.
The impact of this tax is also a topic of discussion. While some see the potential revenue generated – estimated at $27 billion a year – as a significant contribution to government coffers, others downplay its significance in relation to the overall national debt. But even $27 billion a year can fund vital public programs or make a dent in the deficit, which, in turn, could mean more funding for programs or help limit the need to cut other services.
Now, there are questions about implementation. One common point raised is the potential for double taxation, but this can be addressed in how the bill is written. The core of this proposed tax isn’t necessarily a radical concept; it’s about treating a form of wealth creation – borrowing against assets – like any other. If you use untaxed securities to obtain loans based on their market value, then you can’t just turn around and claim that the value of the securities hasn’t been realized.
Another potential concern is the possibility of unintended consequences. Some speculate that the wealthy may shift assets to avoid this tax, or that it could hinder their ability to invest and create jobs. But these types of arguments are often raised against any effort to tax the wealthy.
Finally, the political reality of this proposal is also acknowledged. Many believe it will be dead on arrival, and there are many reasons for this. It might be seen as political posturing, designed to appeal to a certain demographic, or, as some believe, it is pure politics motivated by internal party dynamics.
But the discussion itself is important. It highlights how the financial system works for the very wealthy, who can leverage their assets to live lives of extraordinary privilege while avoiding tax liability. While this particular proposal may or may not become law, it’s a step toward broader conversation about wealth inequality, tax loopholes, and whether the system is truly fair for everyone.