There is no law of nature that says only income can be taxed. Loans could be taxed.

You totally get it, and I really like the law of nature phrasing.

How about taxing your mortgage, then?

That could be a law. It would be a bad law for most people since they don’t own any houses.

Taxing loans to billionaires is a good law because it closes the “just take out a loan” loophole.

Alternatively, loans are income today coupled with an expense over some future period.

Including loan proceeds in taxed income (and deducting repayment) is certainly a potential policy choice.

OTOH, treating pledging an asset as security for a loan as a realization event at FMV, making it both taxable if a gain and a basis value update, while taxing capital gains as normal income would also be a way to shutdown the “use secured loans to fund your lifestyle to avoid realizing gains and being taxed” hack.