The most obvious situation is probably where you've invested a certain amount of money in a highly illiquid asset, that can someday (i.e. 10-20 years from now) be liquidated for a significant capital gain. This could, for example, be a business or a plot of valuable land.
I can't deny that it's technically possible. I just think it's extremely far-fetched.
For example, let’s say I buy a Monet painting for X million and a bank is willing to give me a collateralised loan of up to 75% of the asset value. If a bank decides to sell that asset tomorrow (i.e. at a suboptimal time) they might not even get 75% of the value back.
Debt is a lever in business and some people make it big by leveraging big.
It's doubly far-fetched to talk about loans to individuals for $20MM. If you're applying for a $20MM loan, you should have an accountant and your accountant should have told you to put this kind of thing in a corporation. You'll still lose a lot but it shouldn't bankrupt you personally.
But yes, obviously not that common. Random Joe won't be getting these. Random Joe doesn't have $20m in assets either, though.
Can you describe a realistic situation in which you receive a personal loan for $20 million that comes due at once that you cannot pay for by liquidating other assets? This isn't a real scenario. No one will give you this kind of personal loan without collateral or proof of significant unencumbered assets. And at minimum, you'd be doing this through a corporation, or again, you are incompetent.
> The alternative is, one, we keep the top rate reasonable. Nobody should have to pay 70% or 90% or whatever on his income, no matter how large. And everybody should pay income taxes, even if it's just a token amount.
No one in this comment thread said anything about raising taxes to 70 or 90 percent for anyone. You're taking against a nonexistent point.
Nor is this "alternative" an alternative. In no way does this address the fact that a specific income does not guarantee an ability to pay a specific tax rate.
> And two, we should get more of the national income from consumption taxes. If you can run out and buy a bunch of stuff you can then I know you can afford it. I'd have a national system like California's, where things like food and clothing are exempt.
Consumption taxes are effectively regressive. Exempting clothing and food is a decent idea but it's still regressive and I'm not sure foie gras and mink coats should be tax free.
> Don't be an ass. Seriously.
You're arguing against points I never made and you never even stated. You're making appeals to consider imaginary millionaires who can't pay basic taxes. It honestly feels like you're being intentionally argumentative.
> When I "no money" I don't actually mean zero money, though I'm sure there are people who keep large amounts of money in their checking accounts. I mean no money compared to assets. What is a few tens of thousands for someone who has millions in the bank?
The money you have in the bank isn't relevant to your taxes except to the extent that it produces income for you. If you are insanely wealthy and have almost no income, you'll have no trouble paying your taxes.
Are you imagining that I at some point proposed a tax on wealth?