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Buy, Borrow, Die – Explained

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Re: Buy, Borrow, Die – Explained

#241

Post by advael »

SoftTalker wrote: post #95
TrackerFF wrote: post #85

It always puzzled me how tax-adverse some wealthy people are. I'm not talking about the wealthy people that have 100% of their wealth tied up to company (stock) that they operate - but the wealthy people that are just asset-rich, with zero operational duties. Their wealth is handled by wealth managers, they probably don't even know what they own. But minimizing taxes and hoarding wealth is priority number 1.

Why does this puzzle you? It seems like completely expected behavior to me. Most people try to minimize taxes. Who do you know that gladly pays more than they legally have to pay?

I think this is an argument against how taxes are organized, at least in the US

Rather than add a bunch of subsidies in the form of tax breaks, the government could just spend money on programs that accomplish the aim they want. By making this complicated system whereby subsidies are accomplished by negating taxes you would otherwise owe, this means these benefits are more likely to help people who are otherwise going to be paying more taxes, and the fact that these require legwork to opt into without being at risk of the government thinking you're defrauding them, it seems kind of inevitable that it would devolve into a subsidy mostly for wealthier people who are good at navigating the bureaucracy of it, or rather, who can pay someone in what has become a cottage industry of tax (evasion) specialists who ply the trade of doing so in service of people who can afford them

Like, yeah, given that the game is set up this way, the obvious objective of it from the standpoint of any taxpayer engaging with it is to pay as little as possible. But if the aim of the tax breaks are something besides creating said incentive (and the industry around it), it seems like bad mechanism design to have it work this way in the first place

Re: Buy, Borrow, Die – Explained

#242

Post by smsm42 »

zkelvin wrote: post #113
xmprt wrote: post #105

Earlier quoted context omitted.

This might be unpopular but I think there are ways that taxing unrealized capital gains could work without being super radical. 1. Allow unrealized losses to be deducted. 2. Once a certain percentage of the gain is taxed, step up the cost basis by the amount of tax paid. That way you avoid double taxation (once under the unrealized value and again when the asset is sold). 3. (optional) Keep the tax rate on unrealized…

Taxing unrealized capital gains already isn't all that radical -- property tax is effectively a tax on unrealized gains of property value, and essentially every municipality has that tax.

Nope it is not. Property tax does not take any gains into account - it's tax on full value (with possible exemptions) not gains, you pay the same regardless whether you bought it for $1 or $1M. Except of course in California where they have this weird scheme which led to the fact that my next door neighbor paid less than half of the property tax I did for pretty much identical house (because they bought it in the 80s) - which looks like negative tax on gains.

Re: Buy, Borrow, Die – Explained

#243

Post by Terr_ »

twoodfin wrote: post #192
yojo wrote: post #56

Earlier quoted context omitted.

I will never have this kind of money. It is still interesting to me from the perspective of understanding whether there is validity to claims that the rich are/aren’t paying their fair share. Assuming the write-up is correct, it provides substantial evidence that the ultra-wealthy are capable of sheltering gains in ways that I am not. As to the risk issue, I see no reason why the “asset” couldn’t be a combination of…

It’s actually much easier for you to “shelter gains” in this way: You don’t have to worry about estate taxation. Anyone can borrow against assets (securities and otherwise) they own. Home equity loans are big business, and securities-backed loans aren’t obscure below $300M. Frankly, it’s the “but the ultra-rich get special low-interest loans” bit that’s the most unbelievable part of the write up. But it’s also the ke…

> It’s actually much easier for you to “shelter gains” in this way: You don’t have to worry about estate taxation.

*shakes fist* "Damn you, Lucky Ducky!"

https://www.gocomics.com/tomthedancingbug/2016/10/28

Re: Buy, Borrow, Die – Explained

#244

Post by nerdponx »

dymk wrote: post #229
hollerith wrote: post #219

Earlier quoted context omitted.

What would the government spend the additional tax revenue on, in your conservative expection?

Healthcare, school lunches, diversion programs, research grants

(conts) infrastructure upkeep, managing various natural resources, emergency management, weather reporting/forecasting/research, economic reporting/research...

There are so many valuable services provided by the US federal government. People just take it all for granted.

Re: Buy, Borrow, Die – Explained

#246

Post by gen220 »

brigadier132 wrote: post #170
TrackerFF wrote: post #85

It always puzzled me how tax-adverse some wealthy people are. I'm not talking about the wealthy people that have 100% of their wealth tied up to company (stock) that they operate - but the wealthy people that are just asset-rich, with zero operational duties. Their wealth is handled by wealth managers, they probably don't even know what they own. But minimizing taxes and hoarding wealth is priority number 1.

Owning productive assets is a tortured use of the word hoarding. edit: Hoarding is buying assets that could be used productively and storing them somewhere instead of using them. People with a political axe to grind like taking words with negative connotations and applying them to things that don't make sense to manipulate you. If you think about it for more than two seconds you will understand we already have a word…

I’ll bite. Of every dollar you contributed to your 401k last paycheck, how many cents of them do you think you’ll actually spend in retirement, on a risk-adjusted basis?

For me, the answer is certainly not 100 and not 0, let’s say it’s 80 cents. Speaking for myself, I think that marginal 20 cents is by definition hoarding because the marginal utility of money to me at that point is negligible.

Sure it could benefit my kids or get me a nicer retirement home. But there are kids that are homeless, and our public education system is crumbling. I personally would much rather those 20¢ be redistributed to people who need it. Just speaking for myself.

Re: Buy, Borrow, Die – Explained

#247

Post by twoodfin »

manquer wrote: post #216
SergeAx wrote: post #213

> Let's assume the asset appreciates at an annual rate of 8 percent. Easy peasy. You going to the asset shop and buying there a brand new shiny asset, which will appreciate 8 percent for the next 30-40 years. This is a great plan. Swiss watch.

The return % is hardly important to what author is saying here. You can assume 4% and still get to 200M in 35 years. Does 200M or 750M make any difference to the point ?

Yes, it does matter: The entire reason this scheme is supposed to work is the gap between the % in asset value gains over time and the % interest rate charged by these supposed bankers to the ultra-wealthy over the same time.

If those are equal, this scheme is a terrible idea. You’d be much better off selling some % of the assets and paying LTCG as a fraction of the gains than paying all of the gains in interest.

So now the question is simple: If you can “buy” a risk-free 8%-earning asset, so can your friend the banker. But you can’t. You can buy a risky asset and hope it does better than the interest rate long-term, so your banker doesn’t invoke his rights to a lower yield but safer investment, which involve being able to seize your asset if its price declines.

If the rich could buy a risk-free 8% asset and borrow against its value with a 4% loan, they’d have a perpetual money machine. No such magic exists.

Re: Buy, Borrow, Die – Explained

#248

Post by Bloating »

littlestymaar wrote: post #190
SoftTalker wrote: post #95

Earlier quoted context omitted.

Why does this puzzle you? It seems like completely expected behavior to me. Most people try to minimize taxes. Who do you know that gladly pays more than they legally have to pay?

> Most people try to minimize taxes No, most people don't care about their tax the way wealthy people do. I ended up in a wealthy family through marriage and I can tell you nobody I my original social circle spent even a fraction of the effort the wealthy do when it comes to taxes.

Generally, tax planning & preparation is going to be far more complicated for wealthy individuals, especially business owners with diverse investments.

What you see as "minimizing taxes" could be a necessary responsibility. If you're on the outside looking in, you may be uninformed about their circumstances and responsibilities. Its definitely a 1% of the 1st world problem, but its still a responsibility that has to be managed; Unless you're familiar their THEIR circumstances, its easy to incorrectly assume motivations.

Be glad you live in a country where you have this problem to complain about.

Re: Buy, Borrow, Die – Explained

#249

Post by barbazoo »

hollerith wrote: post #219
barbazoo wrote: post #215

Earlier quoted context omitted.

At some point in my life I took a step back to look at my life and how I’m doing and how much I pay for that life. Maybe I’m just incredibly lucky. My conservative expectation is that we all have to start contributing a lot more over the next few decades if we want to maintain our standard of living, otherwise it will just gradually get worse. I hope I’m wrong.

What would the government spend the additional tax revenue on, in your conservative expection?

Climate crisis alone will make maintaining our infrastructure much more expensive in a lot of places.

Re: Buy, Borrow, Die – Explained

#250

Post by Bloating »

justsomehnguy wrote: post #193
SoftTalker wrote: post #95

Earlier quoted context omitted.

Why does this puzzle you? It seems like completely expected behavior to me. Most people try to minimize taxes. Who do you know that gladly pays more than they legally have to pay?

> Who do you know that gladly pays more than they legally have to pay? What paying more in taxes gets more done in the things paid by taxes. It's like there is a direct dependency between a money received from the taxes and the things made/built on the tax money.

The rule of Bureaucracy: grow to absorb all available resources
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