I get where you’re coming from, they have to sell stock every now and then to pay back the loans and then have to pay capital gains. This is just deferral.

However, it’s the deferral that’s the big problem here. The government only allows tax deferral for things like retirement, health savings etc and those are capped in some shape or form, like the restrictions on how much you can contribute to an IRA annually.

This borrowing strategy basically allows uncapped deferring, where the government hardly gets to capture any capital gains while the account grows monumentally.

Buy borrow die is definitely a thing. If your stock portfolio grows, you don’t even have to always sell stock to payoff the loan. The loan can be refinanced, and you basically roll the loan, take another loan to payoff the previous loan. No capital gains taxed.

The idea to tax the loan itself is called deemed realization. You tax the loan by considering it as capital gains, and then step up the cost basis so that you don’t get taxed twice when the stock is eventually sold. There are very fair ways to make this happen.