The richest people borrow against their stock (2021) • Hacker News Board

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

#311

Post by kwere » Wed, Oct 16, 2024, 10:18 PM UTC

theshrike79 wrote: post #142

doe_eyes wrote: post #2

By borrowing against their holdings. The framing is deceptive. You can do this too: there is no requirement to have billions in collateral. 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. The gotcha is market risk. If there's another crash akin to the housing crisis - and there will be - the bank will liquidate your ho…

You can also buy art. 1) buy a painting for X 2) have it evaluated, sometimes the price is higher than X 3) put it in storage or a tax loophole between countries 4) use said painting as collateral for low interest loans Now you have money to invest, as long as you make more than the low interest loan, you're making profit.

there was a loophole that allowed wealthy people to donate to museums works of arts in exchange of a write off on the value of the artwork. to limit abuses they patched it so that you can writeoff only the purchase price not the market value. I heard a workaround is having living artist create a artwork directly for you and getting it appraised to a crazy amount for writeoffs.

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

#312

Post by scotty79 » Wed, Oct 16, 2024, 10:35 PM UTC

vel0city wrote: post #296

scotty79 wrote: post #287

Earlier quoted context omitted.

> spending money outside of the tax jurisdiction away from the knowledge of the tax jurisdiction is a loophole. Yeah, but how? How do you carry it or send it across the border? Cash? Gold? Good luck with that. You'd basically have to set up a smuggling operation for cash like people now do for drugs. With the risk of cash going missing and every step of the road. Becasue it's not hot and whoever steals it can use it…

> I expect their bank to to report they made a transfer abroad and deduct spending tax automatically So we're not taxing spending, we're taxing bank transfers as well. Maybe they just put it in a savings account overseas. Maybe they're paying off a loan for money sitting elsewhere. Who says it was a sale? Prove they bought something. >> Having poorer people pay more effective tax rates than wealthier people doesn't s…

> So we're not taxing spending, we're taxing bank transfers as well

No. We are taxing spending. Transfering money abroad counts as speding. Transfering within the country doesn't.

> Maybe they just put it in a savings account overseas.

Doesn't matter. Once it leaves the system it's treated as spending.

> Maybe they're paying off a loan for money sitting elsewhere.

Paying off a loan is spending. Both abroad (as everything else abroad) and within the country too.

> Prove they bought something.

No need. Spending is something defined not something natural that needs proving. What I'm proposing is defining spending as reduction in amount of owned currency due to either transfer abroad or due to any agreements between companies or companies and customers.

> But that is what you're advocating for, by pushing it to just an extremely complicated sales tax and complicated system of fractically more complicated credits for exports

If you think that's complicated don't ever read on current taxes, fees and procedures.

My idea is comparably simple. General rule is that spending gets taxed. Tax credits are awarded to promote certain activities (like exporting or living). Nothing else. No need for income tax, corporate tax, VAT, sales tax, social security fees, health premiums, import tariffs, excise taxes and so on.

> Inherently the wealthy will spend a smaller percentage of their income.

At this point I don't think you can imagine it being any other way. I think you are fixating that we all have same stomachs and since poor people earn less feeding ones stomach will always be a larger percentage of money that available for them to spend (so higher percentage of tax).

But the rich don't spend money on what they eat alone. They spend it on cars, yahts, luxury, and what's way more impactful real estate, companies, assets, investments in general, even lobbying ... things that they must do because those are the things that bring them money ... those are the things purchasing which made rich rich in the first place and make them keep getting richer ... all of those would be taxed. I don't think you can say the same for any other proposed or real system for taxing the rich that relies on accounting for income or wealth.

Musk buying Twitter would be taxed on this purchase.

If giving the poor tax credits so that they have negative tax doesn't solve the conundrum for you I don't think anything ever will.

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

#313

Post by vel0city » Wed, Oct 16, 2024, 10:58 PM UTC

scotty79 wrote: post #312

vel0city wrote: post #296

Earlier quoted context omitted.

> I expect their bank to to report they made a transfer abroad and deduct spending tax automatically So we're not taxing spending, we're taxing bank transfers as well. Maybe they just put it in a savings account overseas. Maybe they're paying off a loan for money sitting elsewhere. Who says it was a sale? Prove they bought something. >> Having poorer people pay more effective tax rates than wealthier people doesn't s…

> So we're not taxing spending, we're taxing bank transfers as well No. We are taxing spending. Transfering money abroad counts as speding. Transfering within the country doesn't. > Maybe they just put it in a savings account overseas. Doesn't matter. Once it leaves the system it's treated as spending. > Maybe they're paying off a loan for money sitting elsewhere. Paying off a loan is spending. Both abroad (as everyt…

> Paying off a loan is spending.

Talk about "double taxation" and wealthy being able to avoid taxes. I need a loan to buy a car. Taxes at the purchase, taxes as I pay back the loan. I take out a mortgage. Taxes on the sale, taxes on the mortgage payment. Meanwhile someone able to drop several hundred thousand in cash pay taxes once.

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

#314

Post by hn_throwaway_99 » Thu, Oct 17, 2024, 1:01 AM UTC

Zenzero wrote: post #121

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…

At the time the estate tax is being considered isn't that usually down to a single surviving individual? I imagine it's uncommon for a couple to die at once to qualify for the 27m exemption.

Search for "estate tax exemption portability".

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

#315

Post by bruce511 » Thu, Oct 17, 2024, 3:15 AM UTC

mikeyouse wrote: post #283

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 people to "Sell the family Farm" has been used by estate-tax detractors for so long that there are multiple special programs in place to ensure it never happens (interest-free loans, etc). Given that the current limits are over $13M per person or $26M/couple where zero tax is owed, I don't think this "woe is us" routine resonates any more.

That's exactly my point. The current system is working. We explicitly don't want to go to the place where inheritance forces a sale.

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

#316

Post by bruce511 » Thu, Oct 17, 2024, 3:17 AM UTC

PaulDavisThe1st wrote: post #306

rijoja wrote: post #297

Earlier quoted context omitted.

> 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.

That's exactly the point. We don't want to change anything that leads to these inheritance tax problems.

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

#317

Post by KingOfCoders » Thu, Oct 17, 2024, 3:53 AM UTC

caeril wrote: post #286

KingOfCoders wrote: post #176

Earlier quoted context omitted.

One of the best things when you are rich, you can buy when everyone wants to sell, and sell when everyone wants to buy. At one level of money you are not impacted by a market downturn or crisis. Many very rich people in Germany became very rich during or after WW2 - but they already were rich. Normal people just get poor in a crisis or market downturn.

> One of the best things when you are rich, you can buy when everyone wants to sell, and sell when everyone wants to buy. Generally untrue, since most rich people hold their assets in what's being sold. There are a handful value investors left, who bother holding cash equivalents when PE ratios get absurd, but they are few and far between. Tech billionaires, in particular, are very unlikely to be sitting on much cash…

"Generally untrue"

I know several people who bought vast amount of real estate during the financial crisis.

You don't need to "sit on cash" to buy things.

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

#318

Post by chii » Thu, Oct 17, 2024, 6:39 AM UTC

cryptonector wrote: post #237

attentive wrote: post #153

Earlier quoted context omitted.

Pay taxes once vs pay interest forever? At what point it'll break even and go negative?

Let's say you're worth $100bn. You don't need to spend $1bn a year, just even a few tens of $ millions will be plenty, so you're borrowing a minute portion of your net worth. And your stocks will be going up in value, typically, so... you'll never run out of money. Plus you'll be a great customer for the banks that lend you money, so you'll get preferential interest rates. You'll never run out of money. You'll die an…

> You'll die and still have the lion's share of your wealth

and i don't see anything wrong with that at all.

It seems, recently at least, that a lot of people believe they're somehow entitled to the wealth that these high networth individuals have managed to accumulate.

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

#319

Post by gnepon » Thu, Oct 17, 2024, 7:02 AM UTC

listenallyall wrote: post #303

WA wrote: post #211

Earlier quoted context omitted.

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?"

Fairness here usually refers to the inequality left over after tax, not the tax amount itself. When the US is the 127th most unequal country out of 168 measured (by the Gini Coefficient), along with still having abject poverty around, it's not overly ideological to say more distribution needs to happen.

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

#320

Post by UltraSane » Thu, Oct 17, 2024, 7:05 AM UTC

listenallyall wrote: post #303

WA wrote: post #211

Earlier quoted context omitted.

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?"

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