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The richest people borrow against their stock (2021)

forbes.com

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

#301

Post by valval »

atmavatar wrote: post #299
hn_throwaway_99 wrote: post #35

Earlier quoted context omitted.

I disagree the framing is deceptive. A big reason this is done is to avoid paying taxes altogether - borrow against your equity, and then when you die your heirs receive a step-up in basis, so the gains are never taxed. To make it worth while you need to have a crap ton of money, such that the interest on your loans is less than the estate taxes you'd pay. Only very, very rich people pay any estate taxes in the first…

Borrowing against the current value of your stocks should automatically cause any gains to become realized for tax purposes.

Funny that you’d take this route. I’d just lower capital gains tax rates.

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

#303

Post by listenallyall »

WA wrote: post #211
mherrmann wrote: post #205

Earlier quoted context omitted.

I think it does matter. Let's assume Musk paid $12B. How much have you paid? Isn't it then actually reasonable to say that he contributed more than you to the country, even if his tax percentage is lower than yours?

What do you gain by talking about absolute numbers? They are meaningless. By this logic, Musk could pay only $1 million in tax and still would've "contributed more to the country" than most individuals. If you talk about taxes percentage-wise, you make clear that the super-rich do not pay their fair share, that they will get richer faster than everybody else and, the most important fact, that long-term stability migh…

What is "fair share"? What in life is always "fair"? Why are tax rates lower in the lower income brackets, instead of a flat rate - that doesn't seem fair.

Lots of citizens pay zero in income taxes (because their income is low), are they also not paying a "fair share?"

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

#304

Post by vel0city »

caeril wrote: post #288
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…

> how is the one tax somehow better? Local and state taxes generally actually help you. Your local infrastructure is maintained, and your kids go to schools funded by your taxes. Federal taxes, however, are largely transfer payments from the productive to the unproductive, as well as funding wars in areas that have absolutely nothing to do with you. It's pretty easy to make the distinction between "good" and "bad" ta…

Completely ignoring the actual question.

>> If there were five taxes of one percent each versus one tax of 20% how is the one tax somehow better?

Would you rather pay five different tax authorities a 1% tax each or a single tax authority 20%? Not asking about the morality of those five tax authorities, in this example they're all the same.

The argument is against this idea "double taxation" is something inherently wrong. In the end it's not a matter of how many different taxes actually apply to a given transaction, what matters is the tax amounts and where those taxes are going to.

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

#305

Post by valval »

WA wrote: post #179
refurb wrote: post #159

Earlier quoted context omitted.

Bezos has paid $1.5B and Musk over $12B in taxes according to Google.

Please stop counting taxes of super-rich in absolute terms. It simply doesn't matter. We need percentage-based taxes to get the real picture. Because those numbers seems a rounding error given their wealth.

You’re wrong, it matters.

That’s not even important, though. They pay the same taxes everyone else does when they sell their assets. Selling large amounts of shares comes with its own problems as well, and often it’s not a rational thing to do.

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

#306

Post by PaulDavisThe1st »

rijoja wrote: post #297
carlosjobim wrote: post #209

Earlier quoted context omitted.

> Do you really want to incentivize against people working hard... You mean by taxing labour and taxing commerce? Sorry for the snark, but come on... The Roman empire was built on never taxing labour, because that was seen as an atrocity (never mind the slavery). Instead they taxed luxury goods and debased their currency. The United States was built on never taxing labour, because that was seen as an atrocity (never…

> You mean by taxing labour and taxing commerce? > Sorry for the snark, but come on... > The Roman empire was built on never taxing labour, because that was seen as an atrocity (never mind the slavery). Instead they taxed luxury goods and debased their currency. The United States was built on never taxing labour, because that was seen as an atrocity (never mind the slavery). Instead they taxed importations and debase…

> Inheritance tax is a way for the establishment to take land from small landowners

In the USA, you must have a net worth of at least US$13M per person to be subject to the inheritance tax.

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

#307

Post by saltcured »

dataflow wrote: post #219
bruce511 wrote: post #175

Earlier quoted context omitted.

They're not getting 5m, that's the point. They're inheriting an asset which may be valued at 5m. Like a farm, or a house, or a painting or whatever. Forcing the sale of family property or assets does not serve any good in the long term.

> Forcing the sale of family property or assets does not serve any good in the long term. How is carrying the cost basis forward without stepping it up "forcing a sale"?

It is under a system where ownership transfers are treated as taxable events. The recipient needs to pay the taxes, but cannot afford to without liquidating the inherited asset.

I think you just need to propose a set of related rules changes. Replace the inheritance basis step-up with a similarly scoped rule that says this inheritance does not count as a taxable ownership transfer, so taxes are not due at that point.

You may also need new rules for estimating the basis when records are lost across multiple inheritance events?

The current system is a bit like a tax foregiveness jubilee, but dribbled out to individual families rather than synchronized across the whole economy. It resets things so that regular people can function in this system, without requiring all the family accounting and records keeping of some aristocratic dynasty.

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

#308

Post by lifeisstillgood »

eadmund wrote: post #171
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.

> You have gained income from your capital at this point. No, one has moved money from a debt account into a cash account. For every dollar the cash account increases, the debt account decreases. Income, on the other hand, is final and not paid back. Imagine that I am born with $100,000 in stock: Assets Stocks XYZ 100 shares @ $1,000/share = $100,000 Bank account $0 Liabilities $0 Income $0 Expenses $0 Equity -$100,0…

Ok firstly how do you do the pre/ styling - been here years not worked that one out.

Not answering you at first, I suggest you chnage this to be 1000x-

>>> Imagine that I am born with $100,000,000 in stock

That’s more the level “wealth tax” campaigns are about.

Because wealth belongs eventually to all human society. Getting off this rock and surviving for another thousand years as a species is something 100% of humanity does or 0%

And wealth concentrated in the hands of a few, is wealth that is not put to optimal use. Not educating the pooorest of the planet, not stopping disease and providing nutrition to the growing.

This is not about borrowing and lending money. This is how do we circulate the actual wealth, the doctors and nurses and engineers and road sweepers, the excess energy and the excess knowledge of 8 billion apes.

Musk is right we need to get off the planet, but is wrong if that’s something just a few of us can do. Whitey went to the moon, but he did not stay. Fix down here, else we won’t make it up there.

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

#309

Post by mixmastamyk »

htrp wrote: post #200
SomeHacker44 wrote: post #196

Earlier quoted context omitted.

This is not true: "very low rate." My brokerage starts at 12+% which I would not call low. It never even reaches prime at millions of borrowing, and I do not have remotely enough to get much better a rate.

you need to look at the Lombard landing products offered by banks, not margin loans on brokerage or personal loans

Interesting... https://en.wikipedia.org/wiki/Lombard_banking

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

#310

Post by mixmastamyk »

ywvcbk wrote: post #285
Kon-Peki wrote: post #277

Earlier quoted context omitted.

Yes. In a margin loan, the "things of value" never leave the institution handing out the loan. The borrower buys stock, for example. And the institution giving out the loan has the right to sell whatever you bought to prevent losses on the loan, without your permission if certain conditions are triggered. In a loan backed by collateral, all the money can leave into some external account controlled by the borrower. To…

IBKR claims that you can establish a margin loan by: “Withdrawing funds in excess of settled cash in the denomination of the currency being withdrawn;” So as long as you have enough collateral it’s effectively the same?

Sounds like the GP is saying that there are additional protections with the equity loan. Such as portfolio liquidation prevention if you move assets to another bank.
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