> consuming their unrealized gains.

they are getting loans using their unrealized capital gains as collateral. And these loans are not interest free, and would have to be paid back at some point in the future. And in order to pay the interest on the loan, they will have to realize _some_ gains as income. So that gets taxed.

Is it better that these billionaires don't obtain their mansions and yachts, or that they do and don't get taxed?

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).

They are paying less than half a percent interest in most cases. So the interest doesn't really factor in.

If the banks are willing to lend at this low rate, so be it. It simply means money is cheap.

They are usually only willing to lend at a rate that low to the wealthy only. Because it is lower risk, but mostly because they want to ingratiate themselves to the super wealthy because it can lead to future, more profitable deals.

They try such a thing in Germany by having different rates of VAT (~sales tax) for different products. Basics (such as food) being on the lower rate, and luxury items on the higher end.

Not sure if it actually works well or is overly complex nowadays.

Australia uses GST (essentially same as VAT) but everything that is deemed essential/basic is GST free. It's a standard 10% of course other items incur additional taxes/fees/rates ("luxury cars" also have a 33% tax on top of GST)

Fwiw I think having a standard simple consumption tax + a monthly negative tax is the way to go. So like everyone gets $150/mo from the govt to offset taxes on food or whatever, for example, but then everything could be taxed at a flat rate.

VAT always has felt overly complicated to me. At least everytime I try to look at and understand it. It feels like it's a potentially good solution but calling it VAT will cause issues.

From a consumer perspective VAT as implemented in Europe much simpler than sales tax in the US. The price advertised is actually the price you pay.

As a business it’s really not that much more complex. Add VAT to all the invoices you send out. Keep track of how much was charged to you by your suppliers. Pay the difference to the tax man.

It's simple enough for honest folks. Yet it also enables VAT carousel fraudsters to illegally get their hands on billions each year.

https://en.m.wikipedia.org/wiki/Missing_trader_fraud