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The richest people borrow against their stock (2021)

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Re: The richest people borrow against their stock (2021)

#261

Post by oceanplexian »

vel0city wrote: post #228
commandlinefan wrote: post #224

Earlier quoted context omitted.

> Quadruple tax on me there. We have a problem with that, too.

But like, why? It's a worthless point. If there were five taxes of one percent each versus one tax of 20% how is the one tax somehow better? Which one would you choose, getting taxed five times or once? It doesn't really matter that there's a FICA and an income tax and a payroll tax in the end, what really matters is the overall tax rate and if that's fair given some moral decision of fairness of sharing costs of soc…

Payroll tax is a problem because it’s not accounted for in your overall tax rate, it’s accounted for via lower wages. So you have no idea what your actual income would be if not for all the taxes your employer is paying.

Re: The richest people borrow against their stock (2021)

#262

Post by vel0city »

scotty79 wrote: post #254
vel0city wrote: post #251

Earlier quoted context omitted.

> And yet the rich spend vastly more money than poor You're just totally ignoring the effect of effective tax rates. Sure, the billionaire spent way more money than the poor person. But who spent a higher percentage of their income? And who had vastly more opportunity to spend that in a place outside of that sales tax jurisdiction? Are the poor people flying to other countries to buy their luxury goods? To you, is so…

> But who spent a higher percentage of their income? Everybody knows. That's because we tax income. And income, unlike spending is easier to muddle. You can always fabricate a loss or at least a temporary loss to avoid paying taxes on your income. It's harder to hide spending. > And who had vastly more opportunity to spend that in a place outside of that sales tax jurisdiction? It's just as easy today to move your pr…

> Taxing spending would also help with vast empires that cosist of inherited money

Or we just finally actually tax inherited wealth like other kinds of income instead of giving wealthy many many millions of handouts and tax subsidies.

> with no loopholes

We've both shared examples of lots of ways one can have loopholes on spending money. If the standard is to find a way of "no loopholes", well, spending money outside of the tax jurisdiction away from the knowledge of the tax jurisdiction is a loophole. One wealthier people will have a far easier time exploiting than the poor. Expecting the wealthy are going to report their sales taxes on goods purchased overseas is as hopeful as back in the day states hoping people would report their online purchases. We both agree there's countless ways to obscure your income, if they can obscure their income why is it now impossible for them to obscure their purchases?

> You brought the money into the country because you are in the business of exports? Great, here's a tax credit. You may deduct it from the tax you pay on your excursions abroad.

So those who make money on exports pay even lower tax rates than those working domestically, by design? And who in that "business of exports" actually gets that benefit? The shift worker in the factory making the widgets, the marketing director making the campaign for the widget overseas, the salesperson making the actual sale to the foreign distributor, or the owner of the corporation? Me thinks that benefit isn't going to the shift worker or the marketing person or the salesperson. Cool, even more handouts for the wealthy here. Great ideas. They'll get a tax break on their expensive foreign vacation while us plebs here pay full tax rates.

I'm not trying to make the argument that what we have today is good. There's so much wrong with it. But thinking that throwing it all away and just taxing spending is somehow itself a good and just way of doing it also doesn't make much sense to me. Having poorer people pay more effective tax rates than wealthier people doesn't strike me as fair.

Re: The richest people borrow against their stock (2021)

#263

Post by Scoundreller »

echoangle wrote: post #193
koolba wrote: post #183

Earlier quoted context omitted.

> If I buy something for $10 and it's worth $10,000 when you inherit it, you should (obviously?) be taxed on the increase in value from $10 -> $10,000 if/when you sell. The purchase price shouldn't be "reset" to $10k. There’s nothing “obvious” about tax policy. It’s an arbitrary determination of what’s in and what’s out. Taxing capital gains at all is not “obvious”. Taxing transfers of assets to your children, whethe…

> The same law is the one that lets the surviving spouse or children to continue to live in a home rather than be forced to sell due to a sudden realized capital gain. You can argue that you don’t care about keeping multi millionaires in their childhood homes after their parents die, but it’s hardly “obvious” that it should be taxed. So make an exception for a single home the inheritor personally lives in and tax eve…

We have this in Canada, but it also means the richer you are, the bigger the subsidy you get.

Also means people over-invest in their homes and remain in homes that are larger than necessary for themselves instead of downsizing.

And renters get squat.

Re: The richest people borrow against their stock (2021)

#264

Post by vel0city »

oceanplexian wrote: post #261
vel0city wrote: post #228

Earlier quoted context omitted.

But like, why? It's a worthless point. If there were five taxes of one percent each versus one tax of 20% how is the one tax somehow better? Which one would you choose, getting taxed five times or once? It doesn't really matter that there's a FICA and an income tax and a payroll tax in the end, what really matters is the overall tax rate and if that's fair given some moral decision of fairness of sharing costs of soc…

Payroll tax is a problem because it’s not accounted for in your overall tax rate, it’s accounted for via lower wages. So you have no idea what your actual income would be if not for all the taxes your employer is paying.

> So you have no idea what your actual income would be

Payroll taxes aren't some secret things which are impossible for an employee to calculate on their own. You're right, it's not usually directly shown to an employee on their paystub, but it's pretty trivial to do the math and see what your employer paid (or was at least originally liable before any weird tax handouts, but typically rare) for your salary.

I do think payroll taxes should be required to include on paystubs if even just as an informational aspect to people. People should have a real understanding of how much labor is taxed compared to capital. People see "capital gains is 15%? Gosh that seems high..." without realizing how much of their W2 income was taxed. Most people I talk to can't even ballpark what their effective income tax rate was, I often hear "oh I had to pay like $800 in taxes this year, that sucked!" No, you paid a lot more than that, you just didn't pay attention.

Re: The richest people borrow against their stock (2021)

#265

Post by tightbookkeeper »

Apreche wrote: post #230
tightbookkeeper wrote: post #100

Earlier quoted context omitted.

Rich people having more options, and being more insulated from risk, is not news.

It's not news to the world, but it's news to many.

I don’t think so. Stronger and attractive people have more options and opportunity too! This is the kind of thing you can’t lose sleep over.

Re: The richest people borrow against their stock (2021)

#266

Post by consteval »

bdangubic wrote: post #66
JumpCrisscross wrote: post #52

Earlier quoted context omitted.

What OP is missing is the role of collateral. It becomes more important the more perilous the borrower is or might be. Apple borrows for 20 years unsecured at 31 bps above the U.S. [1][2]. That wouldn't contract much if they offered collateral, because the difference in relative risk is modest to the point of immateriality. Similarly, someone with a century of living expenses in marketable securities really only need…

> TL; DR The rich don't need collateral as much as the middle class and poor. You really buy this? Elon could just go fetch $44bn from a bank to buy Twitter without anything to back it?

Yes, I would imagine it would be much easier for Elon to get 44bn as opposed to someone who is homeless.

Re: The richest people borrow against their stock (2021)

#267

Post by mindslight »

gruez wrote: post #18
bdangubic wrote: post #7

Earlier quoted context omitted.

> If you own stocks, your brokerage will lend you money at a very low rate, secured by the equity - typically up to about half of your stocks' worth. This should be illegal of course... You cannot for the purposes of paying taxes say "hey, I don't actually have this money, this is unrealized gains" and then turn around (to brokerage house or anyone else) and say "hey, look I actually do have this 'money' - lemme borr…

>This should be illegal of course... You cannot for the purposes of paying taxes say "hey, I don't actually have this money, this is unrealized gains" and then turn around (to brokerage house or anyone else) and say "hey, look I actually do have this 'money' - lemme borrow against it." Do you think the same should apply to HELOC loans? It's basically the same thing but with your home rather than stocks.

Yes why not, in the general case. With an exception when the loan funds are being reinvested in the property itself. But in the general case where home equity from appreciation is being turned into cash that's then used for other purposes, that looks an awful lot like realizing a gain to me.

In fact this might even be advantageous to certain homeowners who live in a property as their primary residence and then convert it to wholly rental use. Before you move out, take a loan to easily realize of 250k/500k gains which you can then deduct before it's no longer your primary residence.

Re: The richest people borrow against their stock (2021)

#268

Post by mcculley »

next_xibalba wrote: post #231
mcculley wrote: post #206

Earlier quoted context omitted.

Most parents don’t want meritocracy. They want their children to have an advantage over the children of others. They just have not squared this instinct with political ideology.

This is a kind of odd framing. I have children and I don’t see it as zero sum, as in your description. I want my children to do well. I don’t want other children to do worse, necessarily. I don’t care about other people’s children because I don’t know them and I’m not raising them. I want my kids to do well because I have put huge amounts of labor and love into them. The great beauty of most western systems is that t…

Certainly some parents are proponents of the estate tax. I did not say that all parents are opposed to it.

Re: The richest people borrow against their stock (2021)

#269

Post by Jensson »

from-nibly wrote: post #226
Dracophoenix wrote: post #221

Earlier quoted context omitted.

You don't need to be rich to do that, just wise enough to keep savings and live below your means.

No you need to be really long term liquid and thats what poor people really don't have ( liquid assets to throw at buying stock)

Most people are between poor and rich, he said not rich not that the poor could do it.

Re: The richest people borrow against their stock (2021)

#270

Post by lifeisstillgood »

spacebanana7 wrote: post #173
lifeisstillgood wrote: post #141

Which in my opinion is a transaction freely entered into by both parties, and is a taxable event. You have gained income from your capital at this point. Wealth taxes do not need to have someone guess a value of someone’s wealth. The wealthy can tell the government what they think it is at each point.

> The wealthy can tell the government what they think it is at each point. This will need to be audited by the government, at least occasionally. With all the issues that come from estimating the value of a domain names and other unusual assets someone holds. I think restricting the tax deductibility of charitable donations is a better way to start. These transactions are already usually included in tax filings.

Sorry I mean “tell” as in make a freely entered into contract

It’s next to impossible to gauge a person wealth at any point in time so any generic “wealth tax” is a non starter, but that does not mean we should not make efforts to ensure that wealth is taxed at equal amounts as income. I find it hard to see why Warren Buffet should pay 10% on his increase in wealth for one year while his maid pays 40%

If Jeff Bezos borrows 500 million against some shares he is saying that the shares are worth 500m and that he has now realised some of the gains from those shares.

It’s pretty easy to avoid complicating the mortgage market by putting a floor on the amount governments will tax (ie borrow 5 million or less in a fiscal year we don’t care)

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