I think there's kind of a tacit understanding with business owners and legislators that if you collect taxes, you're good. Bezos and Musk might not pay taxes personally, but they oversee operations that result in payments of sales taxes, payroll taxes, employee income taxes, property taxes, etc, in vast amounts.

The historical critiques of class warfare have some good points, because there's obviously a privileged class here that's doing really well on the backs of labor, and this privileged class can afford to buy (and let's face it, it's really bribe) itself ever more privileges for a very tiny share of their wealth.

Wealth != income. What you're advocating isn't changing a loophole, it's developing an entirely new tax (wealth tax) to supplant the old (income tax). It helps to be explicit.

The loophole is that you can get $1M deposited into your bank account, but because it's technically a loan it isn't considered income. This doesn't require a wealth tax, (and getting ex. a home loan shouldn't be taxed as income), but being able to utilize wealth to get a pile of cash that is not taxed is effectively untaxed income IMO.

A wealth tax could address this, but perhaps there are other legislative options, like (partial?) realization of capital gains when used as loan collateral in the income tax code, or something like that. I'd prefer that latter, as it seems more direct.

But I don't know the specific best way to address this, I'm no a tax expert. But, I think its pretty clear that this scheme is an abuse of the system and should be remedied in some way.

This type of loan is really just a form of margin -- the same thing you can get at most stock brokerages (e.g. Schwab, TD Ameritrade, Interactive Brokers, etc). It seems almost impossible to distinguish the purpose of the loans -- e.g. I know people who use these loans to fund primary residence purchases because they lack income for FHA mortgages.

In fact, unless you have a cash-only account, you likely use margin every time you buy & sell a stock. Technically, stock transactions don't settle for 2-3 days. When your brokerage fronts you the shares to immediately buy, sell, or transfer funds, it's all margin under the hood. It gets even more complex once you get into options, swaps, and other esoteric financial instruments.

TLDR: It's simple in principle, but very complex in practice. Further complicating IRS rules is unlikely to win the whack-a-mole competition -- especially when IRS auditors under-target the ultra wealthy to begin with.

I assume they borrow against the after-tax value of the stock, because it will be taxed before being paid back(?) I don't know if that is significant, but I figure it's worth noting.

No that’s not how it works. Infact, you can get a margin loan at 0.75% interest from ibkr if you hold more than 50k usd of stock for half of its value.

Of course, if that value drops you’ll get margin called for more collateral

Half of its value is less than after-tax value, which is at least the initial investment + 63% of the gains.

Maybe I didn’t phrase it right for you,

Unaccredited investors (us, commoners) have access to margin loans for up to 50% value of account.

Accredited investors have access to portfolio margin which can be up to 90% of mark to market value.

That’s nothing to say of any custom financial instruments that banks might come up with to save bezos any taxes. Think swaps.