When the group is "the most successful in the current system", it's not exclusionary / discriminatory or exploitable. Whether their success is due to luck or smarts or inheritance, they succeeded in the current system by definition, because there is only one system. Therefore, they can be asked to pay proportionally more to maintain it. Furthermore, the bargain "to pay less tax, be less successful" is not one that any rational actor would make. It's inherently fair.

The only part you could reasonably quibble with imo is using wealth as a measure of success, but since it is the currency that taxes deal in -- one alternative: government takes some of your children -- it's the one that makes the most ssense. Still, those in society that find some way to life satisfaction without accumulating wealth do have an advantage in the proposed system. Maybe that's something we should encourage?

if it were really true that paying more taxes leads to more success, then they would pay more. But it isn't true - patently not true. The less tax you pay, the more you get to keep for yourself, and reinvest, and the more likely you reach higher "success".

Thiel bought a lot of PayPal equity for basically zero dollars in a tax-free account. The tax exclusion for inheritance is enormous, allowing children to inherit millions and millions without paying taxes and receive a step-up in basis.

so he did pay his taxes - he paid the amount required by the financial instrument setup by the gov't (which happens to be zero here).

And his situation is fairly unique and rare - very few people invested in a startup via their retirement account, and have massive success.

For most people, their wealth would already have been taxed; e.g., people with excess savings that they put into investments such as property or shares.

The very wealthy minimize taxes paid by taking deferred compensation in the form of equity held past the long term capital gains threshold, and then only selling a small portion at the low long term capital gains rate.

The next level tax avoidance approach is as the GP described: don't sell your equity, thereby not realizing any taxable gains, but get cash flow by borrowing against it. This requires you to have so much equity that borrowing a small percentage against it is all you need to pay for your daily life, a position that few people are in.

That's just scratching the surface of tax avoidance mechanisms, but the result is as Warren Buffett described: he pays a lower tax rate than his secretary.

but they'd have to pay interest on that borrowing, and presumably, these interest from borrowings for daily life and consumption is not tax deductible (or only the portion related to an investment expense could be deducted).

Therefore, to pay that interest, they'd either have to borrow even more, or sell some equity to pay. The current taxation scheme encourages this, because if the person's consumption is lower than their wealth's growth, they would want to reinvest their excess, and this is the most efficient way to do so without the state taking away a large portion from taxation.

Or take a minimal salary or use equity sold at the low long term capital gains tax rate to pay for it.

Also consider that when you have huge amounts of assets - far greater than the loan principal itself - you can negotiate an interest rate that regular people can't. Borrowing 20M for living expenses against assets worth 200M is a very low loan to collateral value ratio.