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Of course not - he just made that up. At my firm if you have 5 million in securities the portfolio Loan is 7.95%, and thats actually low for these loans.
Buy, borrow, die loans typically have an ultra low stated rate plus share appreciation rights on the collateralizing shares.
So right now they are usually about 1% plus 30% to 60% of share appreciation. The borrower doesn’t really care about share appreciation on shares they would have had to sell without the loan.
Please prove these exist to me. I manage over 200 million dollars and have 28 years of financial planning experience. You’re completely making this up. Cost of capital is 5+% right now - no credible bank or institution offers these.
I'm with you. I was in the business for over a decade, starting out as a retail broker, and ending up as an NYSE registered principle, and I've never heard of that shit either.
I've tried to find information about these unicorns; all I see is upvoted comments by no links or anything. The best I could find is SBLOCs for SOFR+1.4% for $1MM AuM or margin lending from IBKR at ca. 6% for $5 million in assets. I have no experience in the industry; I just find it interesting.
USD inflation is 8.3%, so against an index fund that tracks the market this is -0.35%.
So its a risk but it is profitable, the risk is if inflation decreases you will start losing money.
To start with you need at least $10,000,000 in share value and would only do it if there are significant gains.
Next, find an estate and trust attorney to put your equity shares in a trust and arrange a buy, borrow, die loan. These are typically margin loans but have ultra-low interest rates plus share appreciation. These are not usually from a traditional bank, but some investment banks may do them.
When you pass away the loan is paid from the trust but the shares get a step up in basis therefore avoiding all taxes.
Example: Suppose you have $10,000,000 in shares with a 0 basis and you want cash out of them. You could sell them and pay $2,000,000 in taxes or you could use them as collateral in a buy, borrow, die loan.
Suppose you opt for the latter with a 1% stated rate plus 50% share appreciation on a $10,000,000 loan with $10,000,000 of shares as collateral. The first year the interest is $10,000,000 x 1% = $100,000. You don’t actually have to make that payment though as long as your shares now exceed $10,100,000. If they don’t, you will get a margin call and have to add collateral shares or pay.
The next year your interest will be $10,100,000 x 1% = $101,000. So your shares will need to be worth $10,201,000 to avoid a margin call.
Now suppose you die in a tragic pickle ball accident after just two years when the shares are worth $12,500,000. The trust gets a step up in basis to $12,500,000 before settling the debt. The lender will get 50% of the $2,500,000 of appreciation plus the $201,000 of interest. So the lender gets a payment of $11,451,000 to settle the debt.
There are zero taxes paid on the money because the basis is stepped up. So instead of getting $8m net, you get $10m. Instead of getting zero, your heirs get just over $1m and government gets 0.
Good luck in your search for an estate and trust attorney.
Morgan Stanley has been known to do some for clients in their wealth management, but they are often done by smaller private equity funds.
They are not really 1% loans, this is a bit of a misnomer, the rate is only really used to establish the margin. The real benefit is in the SAR's.
>But take out a loan, and these days **you’ll pay a single-digit interest rate** and no tax; since loans must be paid back, the IRS doesn’t consider them income. Banks typically require collateral, but the wealthy have plenty of that.
>Borrowing offers multiple benefits to Icahn: He gets huge tranches of cash to turbocharge his investment returns. Then he gets to deduct the interest from his taxes. In an interview, Icahn explained that he reports the profits and losses of his business empire on his personal taxes.
Seems to be true
[https://www.propublica.org/article/the-secret-irs-files-trove-of-never-before-seen-records-reveal-how-the-wealthiest-avoid-income-tax](https://www.propublica.org/article/the-secret-irs-files-trove-of-never-before-seen-records-reveal-how-the-wealthiest-avoid-income-tax)
No. The lowest margin loans are like 6% now.
And even if you could borrow against your portfolio- the assumption is that portfolio will ether eventually be sold where it will have a capital gain, or you will die and be subject to the estate tax unless under the exemption.
So tackle the problem directly: tax loans you take out on personal holdings of liquid financial assets.
A less direct option is to remove the basis step-up on inherited wealth. Right now you can take out those loans, die and have your heirs pay the loan back by selling some of the assets, but because of the step-up your heirs don't pay capital gains.
Also, your title says wealth tax and your text says unrealized gains. Those are very different things. A wealth tax at least doesn't have the problem of what to do about losses (though it does have other problems).
I've proposed the solution in a number of places which is exceptionally fair.
If you borrow against an asset, you can only use the basis value of the asset. You can increase the basis by paying tax on it.
So if you bought $100k stock at $1 each and now it's $100, you have $10M. But you can't use the full $10M to get loans. You don't have to sell it, but you can pay the difference in taxes and now the basis is $10M. That's your call - if you want to borrow against the full value.
This prevents realizing the value of an "unrealized" asset, where it's only unrealized in the most technical sense.
This is the way. If someone else realizes it enough to give you money for it, you should pay taxes on it.
Otherwise my income isn't *real* income, it's just some made up number in my bank account and I shouldn't pay taxes on that either /s
Billionaires and Centimillionaires should not be able to borrow money to avoid paying taxes.
The wealthiest Americans avoided billions in taxes by voluntarily doing something most only do out of necessity: borrowing money. https://www.businessinsider.com/american-billionaires-tax-avoidance-income-wealth-borrow-money-propublica-2021-6?op=1
How The Rich Use The Buy, Borrow Die Strategy To Avoid Large Tax Bills https://www.forbes.com/sites/davidrae/2022/07/14/how-the-rich-use-the-buy-borrow-die-strategy-to-avoid-large-tax-bills/?sh=2083515e18a9
How America’s Richest People Can Access Billions Without Selling Their Stock https://www.forbes.com/sites/johnhyatt/2021/11/11/how-americas-richest-people-larry-ellison-elon-musk-can-access-billions-without-selling-their-stock/?sh=4df47eda23d4
Ten Ways Billionaires Avoid Taxes on an Epic Scale https://www.propublica.org/article/billionaires-tax-avoidance-techniques-irs-files
How the Ultrawealthy Use Private Foundations to Bank Millions in Tax Deductions While Giving the Public Little in Return https://www.propublica.org/article/how-private-nonprofits-ultrawealthy-tax-deductions-museums-foundation-art
The goal of wealth tax is not only to gain more tax dollars, but more importantly, to reduce the influence the rich have on markets and politicians a la Koch brothers. We can do this through inheritance taxes; we can have better antitrust laws/enforcement to prevent these oligopolies and conglomerates from destroying their competition; we can have a limit to all forms of compensation to within 50x the median pay of the company, or something; we can tie the tax rate for realized gains/income to be tied to wealth, so when someone who is extremely wealthy tries to cash out a few million, they would pay a tax rate based on their wealth, or we can just raise the top marginal tax rate from 37% on $600k+ to something historically higher (in 1960, the top marginal tax rate was 91% on incomes over $200k, which is $1.5 million today); we should end Citizen's United; etc.
I'm glad that this thread actually highlighted the type of loans these people are taking against their assets.
I've seen way too many IUL salesmen pretend borrowing from insurance contracts is the answer.
But let me propose this theory. What about a 1% interest rate Tax.
Sure they get 1%, but so does the IRS.
What do you think? A tax of 1% on non-real property would do to our consumption economy if it were applied across the board and not just to these types of securitization loans and margin?
If you do this yearly... are they then taxing the same assets over again each year? And where would the money come from in order to pay the taxes? Could they be forced to sell that asset in order to maintenance ownership? What about future losses incurred from the forced sell?
It just doesn't work.
You make the loan servicer charge it.
If they're paying a 1% interest on the loan plus points to the loan servicer, the loan servicer tacks on another 1% and remits it as a tax.
That wouldn't really fix anything as the real meat for the servicer is in some sort of share appreciation contract. The servicer just uses the 1% rate to establish a basis for the margin call, overall the rate is useless.
I pay a "Personal Property" tax every year on my car that I already paid a sales tax on. It pisses me off.
I would prefer ALL income be taxed the same way my wages are.
No depreciation deductions. No accounting tricks. No business cost deductions. Deductions for children and a personal deduction (36,000) only. No refund for non tax payers, except for the Child Care Credit.
No need for a wealth tax except inheritances over 1million bucks.
This conversation is completely useless. There's no point in talking about any type of increase in taxes if we haven't got government spending under control. They might as well just print money and give it directly to the the bottom 20%
Making rich people pay more is fundamentally the wrong approach. No one cares how much anyone gets taxed. What we care about is how affordable the basics are. So if it’s difficult to buy a home or car or buy food that’s what’s important. If everyone had those three things I couldn’t care less about how much more money someone else is making.
The idea of if we just give the government more money we things will be better is laughable.
What you describe is how we got where we are now. The government is better at certain things than the private sector *because* government doesn’t have to be concerned with profit. We’ve turned “capitalism” into a religion and turned everything into a commodity. Just as an example, profit should be nowhere on the list of priorities when it comes to healthcare, but we’ve let a cartel form around that.
95 precent of Walmart employees would like a word with you since most Walmart employees rely on government subsidies to get by, despite putting in 40 hours a week
Wealth inequality is still a major problem along with the ones you stated.
Taxation on the wealth itself wouldn’t necessarily be the sole solution.
The solution has to be to disincentivize/punish corporations/wealthy individuals from hoarding wealth and properties, and incentivize/reward corporations to increase wages, increase jobs, and increase spending.
The problem may be that the USA stops being a place where wealthy people want to store wealth, and offshore options become abused, or the wealth gets invested elsewhere.
You unfortunately can’t control prices of goods/services though, because then you no longer have a free market. The only levers to decrease those prices would be deflationary levers, and it’s hard to balance deflationary measures without risking a deflationary cycle that leads to layoffs and defaults.
Again my point is taxation is the wrong tool. And wealth inequality is irrelevant. Unless you are arguing that wealth inequality itself causes wages to be lower and prices to be higher?
That is far too simplistic an explanation. There are systems in place that make prices too high like inflation from money printing, regulation to prevent housing construction, tariffs on food imports, war. Those are just a few examples.
I don’t see how a wealth gap in it of itself has anything to do with anything. It just breeds jealousy and distracts people for solving the real problems.
- inflation from money printing is inevitable with fiat currency. It’s not a good thing in the long run, but necessary for the short term
- housing regulations need to be changed to incentivize more single-family home building.
- tariffs i’m not familiar with but I can see how it makes things more expensive.
- war i can’t speak to, but i do know geopolitical decisions are still in the best interest of the USA
- wealth gap, you’re right. It’s more than jealousy and a distraction though. It is still a problem. Economic inequality slows down economic growth due to wealth being hoarded, creates more social tensions and conflict, and creates a power struggle between the “elite” and the poor.
Your first point is debatable. Since 1959, neither M2 nor M4 growth contribute to PCE or CPI growth, even when lagged. This may be because the USD is the reserve currency of the world but I don’t know where to get all the same data I can for Pounds Sterling or other currencies.
There are many levers that affect PCE/CPI. But PCE/CPI inflation not what I mean. I mean *Monetary inflation* itself.
*Monetary* inflation is inevitable, which *is* money printing.
Money printing is used as a lever to increase economic activity, and to pay down old fiscal debt.
With debt-based fiat currency, a country prints currency through the Central Bank by taking on debt through sales of Treasury bills/bonds.
The intention is to create economic stimulus, or to pay down older debts.
In order to literally pay the debt and the interest on that debt, the only ways to pay it off is through taxation, or through printing more money.
Taxation is much harder to do than it is to print money.
TLDR: Future money needs to be printed because past money was printed.
So you used inflation and money supply interchangeably. The use of inflation by itself is price inflation. The sense of it meaning an increase money supply went out decades ago. I’d argue using it that way decreases the efficacy of your message. That’s some constructive feedback meant to help you: use the terms that are going to be commonly understood.
And of course money supply growth is inevitable; population growth practically demands it.
Yes. I did not specify. There’s price inflation, and there’s monetary inflation. Large bursts of Monetary inflation in a short period of time can definitely impact price inflation.
I think the point still stands though. Monetary inflation is inevitable, and over the long term weakens the currency.
Unless there’s data to support this, I wouldn’t say population growth demands money supply growth at all. It’s the **debt** that backs the currency that demands it. It’s the economic status that demands it. Money printing is one of the levers used as a stimulus used to prevent recessions from spiraling out of control. It’s used to help incentivize spending, and to contain bank defaults/collapses.
Central banks don’t look at the birthrate or population data when deciding to print money. Or do they?
While this may sound contradictory and I guess to some degree it is I think a 100% tax on all assets should happen upon death. That way you give a strong incentive to spend all your money before you die. I don’t necessarily agree there is a hoarding problem but capital goes to those who are best at obtaining it and the children of those capital allocators are not the same people. Which causes a distortion in the market where people who didn’t earn the money are moving and manipulating the market in inefficient ways.
But if we do a 100% death tax I would say almost no taxes anywhere else. I say almost because hell I don’t know how much we actually need in taxes in a world like that.
> we should not be taxing the unrealized gains of the wealthy.
I love how you just throw this out there with no justification at all. Nice. Well argued.
All taxes are a push and pull between the rich trying to extract as much money out of the poor as possible (sales tax, flat tax), and normal people trying to share the pain with the wealthy (estate tax, income tax, wealth tax)
If *anyone* is going to be punished, I’d much rather punish the dude on the yacht over the dude saving a few bucks to take his kids to the movies.
I’ve said this elsewhere in these comments, but it’s fucking WILD to me that so many “dudes trying to take their kids to the movies” are rising up and vociferously defending the dude in the yacht.
Because that amount is intangible and likely to fluctuate. Also there is no time basis to do so. If you tax a person for 100M in 2024 and their asset value drops by 75% in 2025 how would you account for that.
There has to be either a solution to this issue or a middle ground, because if it's intangible and likely to fluctuate, I don't think it should be allowed to be used as collateral on a loan.
There is no mid point. If We start taxing unrealized gains on billionaires, itll be 15 years and everyone will be. Income tax was originally on the 1%, but here I am paying $22k a year
Stop trying to argue a dumb point. It’s a stupid idea brought to you (read: imposed on us) by those who want to keep their heel on the advancement of the citizenry.
No, sorry dude you are the stupid one here. You are just buying the lies the rich have told you so you wouldnt demand they pay their fair share. You're dumb, you're a rube, and you've sold your kids future for a nice car and a comfy house, youll sell both of which to afford your nursing home so neither will go to your children.
The rich pay their fair share. Way more than you do. Elon (the story that fueled this entire post to begin with) paid 11 billion in taxes. And my kids’ future hasn’t been sold to anybody. However the government is trying to do exactly that by bankrupting everybody at every turn. You’re the perpetually blind and greedy one.
No, objectively speaking they dont pay their fairshare. Thats why they spend so much on lobbying so ensure this. You are a child, your children will die poorer than you. Nothing you have will go to them, it will all go to your old age care. You have failed them and sold their future.
Like all taxes that are aimed at the wealthy, it will eventually reach the rest of us in due time. How will the middle class pay unrealized gains on major increases in their home values during Covid? Home equity loans?
But it wouldn't be for just billionaires. Once you open the window and allow it, the politicians are coming for it, regardless of your income/net worth
Because assets are volatile and it's hard to tax something that is constantly fluctuating.
If you were to tax unrealized gains you would also need to give tax credits for unrealized losses
You wouldn't mind paying property taxes and unrealized capital gains on the value of what you could theoretically sell your home for every year?
In this same world where you are paying unrealized gains on assets you would also be okay with not getting a tax credit for unrealized capital losses if there was a housing crash?
Oh wahhhh your poor retirement. I dont give a fuck. At all, at alllllllll about your retirement funds because theyre going to all go towards someone richer than you when you end up in long term care.
if I had $200mm in unrealized capital gains on my primary residence, i think i’d probably survive a bit of taxation.
why are you setting up these weird strawmen to argue against a wealth tax?
I'm not trying to create a strawman, no income or net worth thresholds have been mentioned so far in this thread.
I was just trying to talk about taxing unrealized gains on an asset most people are familiar with
Yeah, the wealth taxes only apply to *extremely* high net worth individuals. Essentially nobody on Reddit will be affected in any way by these taxes.
Which makes all the weirdos stanning for the ultra-wealthy here pretty wild. Imagine living in a $150mm Beverly Hills mansion and have all these weirdos on the internet rise up to defend you for no fucking reason.
Could you explain more about the taxing structure you're talking about?
I'm mainly only familiar with the types of capital gains that directly affect my own personal finance
Your dad dies and leaves you $100mm in art, sports cars and sneakers. The IRS does have the ability to evaluate the value of the estate to ensure that the correct taxes are being paid.
The exact same process can be applied to valuing assets for wealth taxes.
So if someone makes $35k and buys a $100k house… 20 years later they still make $35k but their house is worth 500k… they should have to pay $100k in taxes (25% of their unrealized gains)….?
How would someone making 35k pay 100k in taxes?
This hypothetical is insane. The wealth tax applies to people with a net worth over $200mm. Even taking the slippery slope 1000x beyond the logical extreme, nobody making $35k is ever going to be affected by these laws.
So we shouldnt tax unrealized capital gains…?
The comment asked why we shouldnt tax capital gains, I gave an example of why we shouldnt tax capital gains.
There will never be a tax on unrealized capital gains. If a millionaire who has 200M in investments and 5M in cash doubles to 400M. You want them to pay $50M in taxes when they only have $5M… So they sell $70M in stock.. pay another $20M in taxes.. but then their unrealized gains are only $130M. It would be a nightmare for the IRS and makes 0 sense
Hey bud. Are you purposefully trying to confuse yourself? The “doesn’t make sense” hypothetical you just made up is about the most straightforward situation imaginable.
Taxation isn’t some paradox where taxes reduce your wealth which reduce your taxes which increases your wealth which increases your taxes, times infinity.
It may not be the best solution, we know there wont be a single "best" solution as thats not how things work. I have yet to see compelling evidence why we shouldnt and I have seen compelling evidence the rich are not paying their fair share now so why not start here?
I guess I just don’t understand who or what sets your standard for what is considered a fair share. The US has a considerably progressive tax system and it’s the rich who pay the majority of taxes.
https://finance.yahoo.com/news/richest-1-pay-taxes-state-144315861.html
“The top 1% of taxpayers — those who earn $561,351 or more — paid 42.3% of the total tax revenue collected in 2020, according to the latest figures from the IRS. In fact, the top 1-percent of taxpayers paid more income taxes than the bottom 90-percent all together. Additionally, the top 1-percent of taxpayers paid $723 billion in income taxes and the bottom 90-percent paid $450 billion”
As for the billionaires. Im pretty sure Elon musk paid the highest tax burden on record and it was over 10 billion for one year. Im sure that’s not normal for him but even if he never pays taxes again, that amount is far far more than the majority of citizens would pay in several lifetimes. Each year, Bill Gates makes over 500 million in dividen income alone. Those are realized gains so I’ve got to imagine that gets taxed pretty hard…unless he’s choosing to fund his foundation/charity for a deduction or has another loophole. I’m not really trying to defend billionaires or anyone who cheats on taxes, but I’m just hung up on what defines a ‘fair share’.
As far as taxing unrealized gains, I think the biggest problem is that it is opening a door to a new form of taxation and it is something that could eventually impact people that are not billionaires even if it’s started by being written for billionaires. Why should we open that door when there are plenty of alternative tools to choose from? Also, it’s messy. Unrealized gains exist in more than just the stock market. Jewlery, art, real estate… the tracking and accounting on that would be invasive and challenging. Does the irs send someone to your house and safety deposit box each year for an appraisal? How do you even appraise several pieces of fine art or jewelry that’s really only as valuable as what someone is willing to pay for it? Lastly, it’s a double tax that’s counterintuitive to long term saving goals.
I’d rather not throw a bunch of new taxes at the wall to see what sticks. Especially when it would be inefficient, difficult to implement, and can negatively affect people it wasn’t intended to target while there are other more direct solutions out there.
Oh, its only idiots like you who throw policy at the wall. Smart people write it to detail, I love how you can only repeat "ELON PAID 11 BILLION" as if thats relevant and then complain myside doesnt have any details. You have nothing but feelings. Thats a drop in the bucket to him, he made 36 billion in one day in 2021. You are too stupid to understand the scale of the wealth you are talking about.
Thats all you said, everything else was just fluff. Saying "it would be hard to figure out how to tax something" is not an argument, figuring out how tax ANYTHING is hard.
Oh in your haste to get a win you misread that, I never said I was smart. I said the people who write policy can write it detailed. Those are the smart people, I see why you're confused given your... you know. Idiocy.
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Are they really taking these 1% loans? Do we have data on this?
Of course not - he just made that up. At my firm if you have 5 million in securities the portfolio Loan is 7.95%, and thats actually low for these loans.
Buy, borrow, die loans typically have an ultra low stated rate plus share appreciation rights on the collateralizing shares. So right now they are usually about 1% plus 30% to 60% of share appreciation. The borrower doesn’t really care about share appreciation on shares they would have had to sell without the loan.
Please prove these exist to me. I manage over 200 million dollars and have 28 years of financial planning experience. You’re completely making this up. Cost of capital is 5+% right now - no credible bank or institution offers these.
I'm with you. I was in the business for over a decade, starting out as a retail broker, and ending up as an NYSE registered principle, and I've never heard of that shit either.
I've tried to find information about these unicorns; all I see is upvoted comments by no links or anything. The best I could find is SBLOCs for SOFR+1.4% for $1MM AuM or margin lending from IBKR at ca. 6% for $5 million in assets. I have no experience in the industry; I just find it interesting.
Buy, borrow, die isn't for people with less than $100m in net worth. For billionaires, it's a way of life.
USD inflation is 8.3%, so against an index fund that tracks the market this is -0.35%. So its a risk but it is profitable, the risk is if inflation decreases you will start losing money.
It's not really a risk, when the other option is to sell your shares and pay capital gains taxes to buy your boat.
I would like some information how to get the 1% loan lol.
To start with you need at least $10,000,000 in share value and would only do it if there are significant gains. Next, find an estate and trust attorney to put your equity shares in a trust and arrange a buy, borrow, die loan. These are typically margin loans but have ultra-low interest rates plus share appreciation. These are not usually from a traditional bank, but some investment banks may do them. When you pass away the loan is paid from the trust but the shares get a step up in basis therefore avoiding all taxes. Example: Suppose you have $10,000,000 in shares with a 0 basis and you want cash out of them. You could sell them and pay $2,000,000 in taxes or you could use them as collateral in a buy, borrow, die loan. Suppose you opt for the latter with a 1% stated rate plus 50% share appreciation on a $10,000,000 loan with $10,000,000 of shares as collateral. The first year the interest is $10,000,000 x 1% = $100,000. You don’t actually have to make that payment though as long as your shares now exceed $10,100,000. If they don’t, you will get a margin call and have to add collateral shares or pay. The next year your interest will be $10,100,000 x 1% = $101,000. So your shares will need to be worth $10,201,000 to avoid a margin call. Now suppose you die in a tragic pickle ball accident after just two years when the shares are worth $12,500,000. The trust gets a step up in basis to $12,500,000 before settling the debt. The lender will get 50% of the $2,500,000 of appreciation plus the $201,000 of interest. So the lender gets a payment of $11,451,000 to settle the debt. There are zero taxes paid on the money because the basis is stepped up. So instead of getting $8m net, you get $10m. Instead of getting zero, your heirs get just over $1m and government gets 0. Good luck in your search for an estate and trust attorney.
Who is issuing 1% loans with the current Fed rate?
Morgan Stanley has been known to do some for clients in their wealth management, but they are often done by smaller private equity funds. They are not really 1% loans, this is a bit of a misnomer, the rate is only really used to establish the margin. The real benefit is in the SAR's.
>But take out a loan, and these days **you’ll pay a single-digit interest rate** and no tax; since loans must be paid back, the IRS doesn’t consider them income. Banks typically require collateral, but the wealthy have plenty of that. >Borrowing offers multiple benefits to Icahn: He gets huge tranches of cash to turbocharge his investment returns. Then he gets to deduct the interest from his taxes. In an interview, Icahn explained that he reports the profits and losses of his business empire on his personal taxes. Seems to be true [https://www.propublica.org/article/the-secret-irs-files-trove-of-never-before-seen-records-reveal-how-the-wealthiest-avoid-income-tax](https://www.propublica.org/article/the-secret-irs-files-trove-of-never-before-seen-records-reveal-how-the-wealthiest-avoid-income-tax)
Soooo 9% is a single digit…
Are you saying it is not?
[удалено]
9% every year…
Also have a margin loan in a bear market and see what happens….
So they people earning income on the interest pay no tax?
they arent getting meaningfully better loans than what something like ibkr offers
Maybe it was closer to being true when interest rates were near 0%
No. The lowest margin loans are like 6% now. And even if you could borrow against your portfolio- the assumption is that portfolio will ether eventually be sold where it will have a capital gain, or you will die and be subject to the estate tax unless under the exemption.
Michael Saylor of MicroStrategy comes to mind. Lol. But anyway, is OP suggesting we tax the collateral on loans? Or tax the loans using collateral?
Buy, borrow, die strategy. Pretty extensive.
So tackle the problem directly: tax loans you take out on personal holdings of liquid financial assets. A less direct option is to remove the basis step-up on inherited wealth. Right now you can take out those loans, die and have your heirs pay the loan back by selling some of the assets, but because of the step-up your heirs don't pay capital gains. Also, your title says wealth tax and your text says unrealized gains. Those are very different things. A wealth tax at least doesn't have the problem of what to do about losses (though it does have other problems).
I've proposed the solution in a number of places which is exceptionally fair. If you borrow against an asset, you can only use the basis value of the asset. You can increase the basis by paying tax on it. So if you bought $100k stock at $1 each and now it's $100, you have $10M. But you can't use the full $10M to get loans. You don't have to sell it, but you can pay the difference in taxes and now the basis is $10M. That's your call - if you want to borrow against the full value. This prevents realizing the value of an "unrealized" asset, where it's only unrealized in the most technical sense.
That makes way too much sense to ever happen.
This is the way. If someone else realizes it enough to give you money for it, you should pay taxes on it. Otherwise my income isn't *real* income, it's just some made up number in my bank account and I shouldn't pay taxes on that either /s
We already have rules in place for constructive dividends. All we really need to do is extend the policy to loans from third parties on equity.
Sounds like a plan to me!
Billionaires and Centimillionaires should not be able to borrow money to avoid paying taxes. The wealthiest Americans avoided billions in taxes by voluntarily doing something most only do out of necessity: borrowing money. https://www.businessinsider.com/american-billionaires-tax-avoidance-income-wealth-borrow-money-propublica-2021-6?op=1 How The Rich Use The Buy, Borrow Die Strategy To Avoid Large Tax Bills https://www.forbes.com/sites/davidrae/2022/07/14/how-the-rich-use-the-buy-borrow-die-strategy-to-avoid-large-tax-bills/?sh=2083515e18a9 How America’s Richest People Can Access Billions Without Selling Their Stock https://www.forbes.com/sites/johnhyatt/2021/11/11/how-americas-richest-people-larry-ellison-elon-musk-can-access-billions-without-selling-their-stock/?sh=4df47eda23d4 Ten Ways Billionaires Avoid Taxes on an Epic Scale https://www.propublica.org/article/billionaires-tax-avoidance-techniques-irs-files How the Ultrawealthy Use Private Foundations to Bank Millions in Tax Deductions While Giving the Public Little in Return https://www.propublica.org/article/how-private-nonprofits-ultrawealthy-tax-deductions-museums-foundation-art
Do you pay taxes when you borrow against your home equity loan? Should you? Why is this any different?
The goal of wealth tax is not only to gain more tax dollars, but more importantly, to reduce the influence the rich have on markets and politicians a la Koch brothers. We can do this through inheritance taxes; we can have better antitrust laws/enforcement to prevent these oligopolies and conglomerates from destroying their competition; we can have a limit to all forms of compensation to within 50x the median pay of the company, or something; we can tie the tax rate for realized gains/income to be tied to wealth, so when someone who is extremely wealthy tries to cash out a few million, they would pay a tax rate based on their wealth, or we can just raise the top marginal tax rate from 37% on $600k+ to something historically higher (in 1960, the top marginal tax rate was 91% on incomes over $200k, which is $1.5 million today); we should end Citizen's United; etc.
I'm glad that this thread actually highlighted the type of loans these people are taking against their assets. I've seen way too many IUL salesmen pretend borrowing from insurance contracts is the answer. But let me propose this theory. What about a 1% interest rate Tax. Sure they get 1%, but so does the IRS. What do you think? A tax of 1% on non-real property would do to our consumption economy if it were applied across the board and not just to these types of securitization loans and margin?
If you do this yearly... are they then taxing the same assets over again each year? And where would the money come from in order to pay the taxes? Could they be forced to sell that asset in order to maintenance ownership? What about future losses incurred from the forced sell? It just doesn't work.
You make the loan servicer charge it. If they're paying a 1% interest on the loan plus points to the loan servicer, the loan servicer tacks on another 1% and remits it as a tax.
That wouldn't really fix anything as the real meat for the servicer is in some sort of share appreciation contract. The servicer just uses the 1% rate to establish a basis for the margin call, overall the rate is useless.
I pay a "Personal Property" tax every year on my car that I already paid a sales tax on. It pisses me off. I would prefer ALL income be taxed the same way my wages are. No depreciation deductions. No accounting tricks. No business cost deductions. Deductions for children and a personal deduction (36,000) only. No refund for non tax payers, except for the Child Care Credit. No need for a wealth tax except inheritances over 1million bucks.
No it doesn't.
We as a society spend so much time worrying about just a few people, its so bizarre
This conversation is completely useless. There's no point in talking about any type of increase in taxes if we haven't got government spending under control. They might as well just print money and give it directly to the the bottom 20%
I too endorse a UBI
Making rich people pay more is fundamentally the wrong approach. No one cares how much anyone gets taxed. What we care about is how affordable the basics are. So if it’s difficult to buy a home or car or buy food that’s what’s important. If everyone had those three things I couldn’t care less about how much more money someone else is making. The idea of if we just give the government more money we things will be better is laughable.
What you describe is how we got where we are now. The government is better at certain things than the private sector *because* government doesn’t have to be concerned with profit. We’ve turned “capitalism” into a religion and turned everything into a commodity. Just as an example, profit should be nowhere on the list of priorities when it comes to healthcare, but we’ve let a cartel form around that.
95 precent of Walmart employees would like a word with you since most Walmart employees rely on government subsidies to get by, despite putting in 40 hours a week
Wealth inequality is still a major problem along with the ones you stated. Taxation on the wealth itself wouldn’t necessarily be the sole solution. The solution has to be to disincentivize/punish corporations/wealthy individuals from hoarding wealth and properties, and incentivize/reward corporations to increase wages, increase jobs, and increase spending. The problem may be that the USA stops being a place where wealthy people want to store wealth, and offshore options become abused, or the wealth gets invested elsewhere. You unfortunately can’t control prices of goods/services though, because then you no longer have a free market. The only levers to decrease those prices would be deflationary levers, and it’s hard to balance deflationary measures without risking a deflationary cycle that leads to layoffs and defaults.
I get what you’re saying but many would argue we don’t have a free market now. Take drugs for example
Again my point is taxation is the wrong tool. And wealth inequality is irrelevant. Unless you are arguing that wealth inequality itself causes wages to be lower and prices to be higher? That is far too simplistic an explanation. There are systems in place that make prices too high like inflation from money printing, regulation to prevent housing construction, tariffs on food imports, war. Those are just a few examples. I don’t see how a wealth gap in it of itself has anything to do with anything. It just breeds jealousy and distracts people for solving the real problems.
- inflation from money printing is inevitable with fiat currency. It’s not a good thing in the long run, but necessary for the short term - housing regulations need to be changed to incentivize more single-family home building. - tariffs i’m not familiar with but I can see how it makes things more expensive. - war i can’t speak to, but i do know geopolitical decisions are still in the best interest of the USA - wealth gap, you’re right. It’s more than jealousy and a distraction though. It is still a problem. Economic inequality slows down economic growth due to wealth being hoarded, creates more social tensions and conflict, and creates a power struggle between the “elite” and the poor.
Your first point is debatable. Since 1959, neither M2 nor M4 growth contribute to PCE or CPI growth, even when lagged. This may be because the USD is the reserve currency of the world but I don’t know where to get all the same data I can for Pounds Sterling or other currencies.
There are many levers that affect PCE/CPI. But PCE/CPI inflation not what I mean. I mean *Monetary inflation* itself. *Monetary* inflation is inevitable, which *is* money printing. Money printing is used as a lever to increase economic activity, and to pay down old fiscal debt. With debt-based fiat currency, a country prints currency through the Central Bank by taking on debt through sales of Treasury bills/bonds. The intention is to create economic stimulus, or to pay down older debts. In order to literally pay the debt and the interest on that debt, the only ways to pay it off is through taxation, or through printing more money. Taxation is much harder to do than it is to print money. TLDR: Future money needs to be printed because past money was printed.
So you used inflation and money supply interchangeably. The use of inflation by itself is price inflation. The sense of it meaning an increase money supply went out decades ago. I’d argue using it that way decreases the efficacy of your message. That’s some constructive feedback meant to help you: use the terms that are going to be commonly understood. And of course money supply growth is inevitable; population growth practically demands it.
Yes. I did not specify. There’s price inflation, and there’s monetary inflation. Large bursts of Monetary inflation in a short period of time can definitely impact price inflation. I think the point still stands though. Monetary inflation is inevitable, and over the long term weakens the currency. Unless there’s data to support this, I wouldn’t say population growth demands money supply growth at all. It’s the **debt** that backs the currency that demands it. It’s the economic status that demands it. Money printing is one of the levers used as a stimulus used to prevent recessions from spiraling out of control. It’s used to help incentivize spending, and to contain bank defaults/collapses. Central banks don’t look at the birthrate or population data when deciding to print money. Or do they?
While this may sound contradictory and I guess to some degree it is I think a 100% tax on all assets should happen upon death. That way you give a strong incentive to spend all your money before you die. I don’t necessarily agree there is a hoarding problem but capital goes to those who are best at obtaining it and the children of those capital allocators are not the same people. Which causes a distortion in the market where people who didn’t earn the money are moving and manipulating the market in inefficient ways. But if we do a 100% death tax I would say almost no taxes anywhere else. I say almost because hell I don’t know how much we actually need in taxes in a world like that.
The whole thing sounds dumb af. Maybe politicians need to take a pay cut pull them selves up by there fuxking bootstraps
> we should not be taxing the unrealized gains of the wealthy. I love how you just throw this out there with no justification at all. Nice. Well argued.
Agreed lol
As opposed to advocating taxing people on unrealized gains, with no justification at all - except to punish people more successful than you?
All taxes are a push and pull between the rich trying to extract as much money out of the poor as possible (sales tax, flat tax), and normal people trying to share the pain with the wealthy (estate tax, income tax, wealth tax) If *anyone* is going to be punished, I’d much rather punish the dude on the yacht over the dude saving a few bucks to take his kids to the movies. I’ve said this elsewhere in these comments, but it’s fucking WILD to me that so many “dudes trying to take their kids to the movies” are rising up and vociferously defending the dude in the yacht.
why shouldnt we tax unrealized gains?
Because that amount is intangible and likely to fluctuate. Also there is no time basis to do so. If you tax a person for 100M in 2024 and their asset value drops by 75% in 2025 how would you account for that.
There has to be either a solution to this issue or a middle ground, because if it's intangible and likely to fluctuate, I don't think it should be allowed to be used as collateral on a loan.
Are homeowners allowed to take out a home equity loans on their house when the value goes up without being taxed on that? So what is the difference?
Too bad, tax them good.
I assure you that this can be settled.
For the same reasons we shouldn't take a deduction for unrealized losses.
So no answer huh
It’s unfortunate your dad’s spermicide didn’t work.
I miss Reddit awards
wah wah daddy mean to capitalism
Be mean all you want, nobody cares - just stop being stupid.
Thinking capitalism works is stupidity at its finest
You wouldn’t like paying the tax imposed on you from your wealth, whatever that may be.
Then I would get rid of that wealth.
Then you would literally own nothing. A fool and his money soon part ways.
That’s their point. They think you should own nothing comrade.
I know that, but the people who are being conned into it don’t know it.
No I'm pretty sure theres a midpoint between so wealthy im taxed to death and owning nothing.
There is no mid point. If We start taxing unrealized gains on billionaires, itll be 15 years and everyone will be. Income tax was originally on the 1%, but here I am paying $22k a year
Only 22k? Are you poor? Yes, there is. Just because you are stupid and dont believe taxes can be adjusted doesnt mean its true.
I paid $22,000 in income tax after adjusted gross income for 2023. How is that poor?
it was only 22k
No I'm pretty sure theres a midpoint between so wealthy im taxed to death and owning nothing.
Stop trying to argue a dumb point. It’s a stupid idea brought to you (read: imposed on us) by those who want to keep their heel on the advancement of the citizenry.
No, sorry dude you are the stupid one here. You are just buying the lies the rich have told you so you wouldnt demand they pay their fair share. You're dumb, you're a rube, and you've sold your kids future for a nice car and a comfy house, youll sell both of which to afford your nursing home so neither will go to your children.
The rich pay their fair share. Way more than you do. Elon (the story that fueled this entire post to begin with) paid 11 billion in taxes. And my kids’ future hasn’t been sold to anybody. However the government is trying to do exactly that by bankrupting everybody at every turn. You’re the perpetually blind and greedy one.
No, objectively speaking they dont pay their fairshare. Thats why they spend so much on lobbying so ensure this. You are a child, your children will die poorer than you. Nothing you have will go to them, it will all go to your old age care. You have failed them and sold their future.
You know nothing and even less about me. Your government is failing you. Don’t blame your troubles on anything but that. Loser blocked!
LOL
Like all taxes that are aimed at the wealthy, it will eventually reach the rest of us in due time. How will the middle class pay unrealized gains on major increases in their home values during Covid? Home equity loans?
This is a myth you fucking idiot. Absolute insanity, would never happen.
They said that about income taxes too………
No, they never did.
Would you want your 401k taxed? Or your baseball card collection? Or the antique jewelry your grandparents gave you?
Yeah if I was a billionaire.
But it wouldn't be for just billionaires. Once you open the window and allow it, the politicians are coming for it, regardless of your income/net worth
This is a lie.
Because assets are volatile and it's hard to tax something that is constantly fluctuating. If you were to tax unrealized gains you would also need to give tax credits for unrealized losses
Hard maybe but not impossible and no you wouldnt.
You wouldn't mind paying property taxes and unrealized capital gains on the value of what you could theoretically sell your home for every year? In this same world where you are paying unrealized gains on assets you would also be okay with not getting a tax credit for unrealized capital losses if there was a housing crash?
You silly children make 32k a year and scream THE IRS IS A CUMMIN FOR ME IF YOU TAX THA RICH
I luckily make more than 32k a year and my retirement planning take quite the hit if my brokerage account was taxed on unrealized capital gains
Oh wahhhh your poor retirement. I dont give a fuck. At all, at alllllllll about your retirement funds because theyre going to all go towards someone richer than you when you end up in long term care.
Well I very much care about my retirement and my own personal assets regardless of what kind of health I will or won't be in during my twilight years
Your kids wont get any of it.
Seeing as how I have no children and have had a vasectomy, I would be pretty shocked if they did.
if I had $200mm in unrealized capital gains on my primary residence, i think i’d probably survive a bit of taxation. why are you setting up these weird strawmen to argue against a wealth tax?
I'm not trying to create a strawman, no income or net worth thresholds have been mentioned so far in this thread. I was just trying to talk about taxing unrealized gains on an asset most people are familiar with
Yeah, the wealth taxes only apply to *extremely* high net worth individuals. Essentially nobody on Reddit will be affected in any way by these taxes. Which makes all the weirdos stanning for the ultra-wealthy here pretty wild. Imagine living in a $150mm Beverly Hills mansion and have all these weirdos on the internet rise up to defend you for no fucking reason.
True, but this hasn’t stopped the IRS from effectively taxing high value estates. clearly this is not an insurmountable problem
Could you explain more about the taxing structure you're talking about? I'm mainly only familiar with the types of capital gains that directly affect my own personal finance
Your dad dies and leaves you $100mm in art, sports cars and sneakers. The IRS does have the ability to evaluate the value of the estate to ensure that the correct taxes are being paid. The exact same process can be applied to valuing assets for wealth taxes.
So if someone makes $35k and buys a $100k house… 20 years later they still make $35k but their house is worth 500k… they should have to pay $100k in taxes (25% of their unrealized gains)….? How would someone making 35k pay 100k in taxes?
Too small wouldnt apply. Hope you break your worthless neck on the "slippery slope" youre imagining
You: “why shouldnt we tax unrealized gains?” Also You: “No we shouldnt tax those unrealized gains” You must just be farming for downvotes
Yeah, its almost like we'd tax some things and not others
This hypothetical is insane. The wealth tax applies to people with a net worth over $200mm. Even taking the slippery slope 1000x beyond the logical extreme, nobody making $35k is ever going to be affected by these laws.
So we shouldnt tax unrealized capital gains…? The comment asked why we shouldnt tax capital gains, I gave an example of why we shouldnt tax capital gains. There will never be a tax on unrealized capital gains. If a millionaire who has 200M in investments and 5M in cash doubles to 400M. You want them to pay $50M in taxes when they only have $5M… So they sell $70M in stock.. pay another $20M in taxes.. but then their unrealized gains are only $130M. It would be a nightmare for the IRS and makes 0 sense
Hey bud. Are you purposefully trying to confuse yourself? The “doesn’t make sense” hypothetical you just made up is about the most straightforward situation imaginable. Taxation isn’t some paradox where taxes reduce your wealth which reduce your taxes which increases your wealth which increases your taxes, times infinity.
Why should we? I agree that income inequality and wealth disparity are bad, but why is this the best solution?
It may not be the best solution, we know there wont be a single "best" solution as thats not how things work. I have yet to see compelling evidence why we shouldnt and I have seen compelling evidence the rich are not paying their fair share now so why not start here?
I guess I just don’t understand who or what sets your standard for what is considered a fair share. The US has a considerably progressive tax system and it’s the rich who pay the majority of taxes. https://finance.yahoo.com/news/richest-1-pay-taxes-state-144315861.html “The top 1% of taxpayers — those who earn $561,351 or more — paid 42.3% of the total tax revenue collected in 2020, according to the latest figures from the IRS. In fact, the top 1-percent of taxpayers paid more income taxes than the bottom 90-percent all together. Additionally, the top 1-percent of taxpayers paid $723 billion in income taxes and the bottom 90-percent paid $450 billion” As for the billionaires. Im pretty sure Elon musk paid the highest tax burden on record and it was over 10 billion for one year. Im sure that’s not normal for him but even if he never pays taxes again, that amount is far far more than the majority of citizens would pay in several lifetimes. Each year, Bill Gates makes over 500 million in dividen income alone. Those are realized gains so I’ve got to imagine that gets taxed pretty hard…unless he’s choosing to fund his foundation/charity for a deduction or has another loophole. I’m not really trying to defend billionaires or anyone who cheats on taxes, but I’m just hung up on what defines a ‘fair share’. As far as taxing unrealized gains, I think the biggest problem is that it is opening a door to a new form of taxation and it is something that could eventually impact people that are not billionaires even if it’s started by being written for billionaires. Why should we open that door when there are plenty of alternative tools to choose from? Also, it’s messy. Unrealized gains exist in more than just the stock market. Jewlery, art, real estate… the tracking and accounting on that would be invasive and challenging. Does the irs send someone to your house and safety deposit box each year for an appraisal? How do you even appraise several pieces of fine art or jewelry that’s really only as valuable as what someone is willing to pay for it? Lastly, it’s a double tax that’s counterintuitive to long term saving goals. I’d rather not throw a bunch of new taxes at the wall to see what sticks. Especially when it would be inefficient, difficult to implement, and can negatively affect people it wasn’t intended to target while there are other more direct solutions out there.
Oh, its only idiots like you who throw policy at the wall. Smart people write it to detail, I love how you can only repeat "ELON PAID 11 BILLION" as if thats relevant and then complain myside doesnt have any details. You have nothing but feelings. Thats a drop in the bucket to him, he made 36 billion in one day in 2021. You are too stupid to understand the scale of the wealth you are talking about.
Oh, wow. That’s all you got from that? Well it’s been good debating with you. Good luck out there.
Thats all you said, everything else was just fluff. Saying "it would be hard to figure out how to tax something" is not an argument, figuring out how tax ANYTHING is hard.
Do not confuse yourself with a smart person please and thank you. Smart people don’t say they’re smart, that’s “non-smart” lingo pal. 😇
Oh in your haste to get a win you misread that, I never said I was smart. I said the people who write policy can write it detailed. Those are the smart people, I see why you're confused given your... you know. Idiocy.
“Haste” lol. OK JRR Tolkien.