No, it's not true at all. You are taxed on income, not the increase in wealth. I can have my wealth plummet due to a stock market drop, but owe taxes on my interest income even as my wealth drops. I can go into debt on my $100K income so my wealth is negative, but I still owe taxes on the $100K. Wealth has nothing to do with it except maybe if I die with more than 11 million, and then it is the change of ownership that is taxed--a kind of transaction.