Underfunding the IRS is not a neutral act but a policy choice that disproportionately benefits the rich. Auditing complex, high-value returns requires significant resources. A weakened IRS cannot effectively pursue wealthy tax evaders, creating a massive "tax gap" that functions as a stealth tax cut for the top earners.
To counter the "Buy, Borrow, Die" strategy, the act of borrowing against assets should be a taxable event. This proposal suggests taxing the unrealized gain on an asset at the moment it's pledged as collateral for a loan. This forces the wealthy to pay taxes on their gains without having to sell, raising significant revenue.
Despite voter popularity, broad wealth taxes are historically ineffective. Most OECD countries have abandoned them due to low revenue, administrative complexity, and capital flight. A more practical approach is to focus on targeted reforms like closing the carried interest loophole and taxing capital gains as ordinary income.
The super-rich avoid capital gains taxes by borrowing against their appreciating assets instead of selling them. This allows them to fund their lifestyle tax-free. Since assets are only taxed upon sale, this deferral becomes permanent if they hold the assets until death, when the cost basis resets for heirs.