Representative Friedman Proposes New Tax on Large Loans

A new proposal aims to apply a 23.8% excise tax on certain loans exceeding $1 million in the United States.

Updated on Oct. 20, 2026 in Financial Planning

Representative Friedman Proposes New Tax on Large Loans

Live Poll

Should wealthy individuals pay taxes on loans taken out against their assets?

Representative Laura Friedman has introduced a legislative proposal to impose a 23.8% excise tax on loans and lines of credit that exceed $1 million. The measure is designed to close tax loopholes used by high-net-worth individuals to access cash without triggering capital gains taxes.

Why it matters

The legislation targets the common financial strategy of borrowing against assets as collateral to bypass the tax obligations that typically arise when those assets are sold. By setting the rate to match the top long-term capital gains rate plus the net investment income tax, the bill seeks to standardize the taxation of wealth-based liquidity.

The proposal introduces a 23.8% excise tax on debt instruments, applying specifically to loans and lines of credit exceeding $1 million. This rate is pegged to the combined maximum long-term capital gains and net investment income tax threshold.

The players

Laura Friedman

Representative Laura Friedman is a member of the United States Congress who introduced the legislative proposal targeting large-scale debt instruments.

The details

The bill aims to curb the practice of using substantial loans as a tax-free vehicle to extract value from assets. By taxing these loans, the proposal attempts to align the tax treatment of debt-based cash access with the tax consequences of traditional asset divestment.

The proposal was officially reported on October 20, 2026.

Market Dynamics

The proposed legislation marks a departure from the tax structure established by the Tax Cuts and Jobs Act of 2017 by specifically targeting how capital assets are leveraged. This shift reflects a broader ongoing effort by policymakers to address tax avoidance strategies used to bypass traditional capital gains frameworks.

High-net-worth investors utilizing large credit lines to manage personal liquidity may need to adjust their debt management strategies if this tax is enacted. The change would effectively increase the cost of borrowing against asset portfolios, impacting how individuals weigh debt versus selling assets to access cash.

The takeaway

This proposal signifies a shift toward ensuring that debt-based liquidity is taxed similarly to realized capital gains. Investors should review their current credit strategies to determine how a potential excise tax might alter their overall tax liability.