It doesn't exist hypothetically. It is an asset. It has a value and a worth.
The uber-rich know that. That's why they dump their money into such assets and instead of selling them to liquidate, they borrow against them to minimize their risk, thereby spreading out their tax burden as long as possible and lowering their overall tax bracket. That's how they've gamed the system. The gains are never realized, but they've still made the money because they know that, in the long run, most investment assets increase in value.
But the other problem why you will never see a wealth tax in this country is because the phony socialists actually are quite wealthy themselves. Pelosi, of course, is a prime example. Her husband Paul has a whole lot of wealth.
I'm not sure why borrowing against one's assets to generate spendable cash-flow is "gaming" the system. There is a corresponding liability for that borrowing that must be repaid, along with an interest expense as well. And unless the individual can attribute the interest expense on that liability to an investment use, rather than mere personal consumption, the interest expense will not be deductible (i.e., could not be used to offset other investment interest income the taxpayer has).
The only potential for "abuse" - if one wants to spread that word almost beyond recognition - is in the area of variable prepaid futures contracts that were sometimes written against assets held by the taxpayer. The purpose of these contracts was to more or less effectuate a sale of the asset for cash to a person who would have held the asset as in investment for the long term any ways, but to do so in a way that the putative "seller" would not have a realization event until a substantial period in the future in which the futures contract was settled through transfer of title to the covered assets. Where these arrangements got abusive - and where the IRS cracked down on them - was where a substantial portion of the benefits and burdens of ownership were taken on by the putative seller of the forward contract (e.g., the seller would take possession of the evidence of the property, such as stock certificates, and would be entitled to utilize the income generated by the asset, such as dividends paid on that stock). The IRS would then, usually on audit, treat the VPFC as a disguised sale of the underlying assets at the time the contract was entered into, and would assess tax, plus penalties and interest, on that basis.
Tax minimization is not nearly as simple as a lot of people seem to think.
