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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)

#321

Post by scotty79 »

vel0city wrote: post #313
scotty79 wrote: post #312

Earlier quoted context omitted.

> 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.

Paying back a loan is spending but taking a loan is income and taken as individual might award you tax credit.

But yes, if you use a service, you pay for tax. Even a service of renting some capital.

Again, as a poor person you can get tax credits on your income or just because you are alive that offsets that if the government thinks poor people buying things with loans is societally beneficial or not. Today government does this by raising or lowering the rates which affect so many other things in the economy.

Fine grained control is better.

And what's wrong with double taxation? If you earn money today, you pay income tax, and use it to buy fuel then you also pay VAT and excuse tax. That's triple tax on the same money. Spend your money in societally undesired ways and you are getting it taxed multiple times even today. But just with a myriad opaque systems that don't play nice with each other and are full of loopholes.

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

#322

Post by refurb »

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.

I replied to the comment “they never pay taxes”.

I made no claim as to the absolute amount, just that billions doesn’t seem like “never paid taxes”

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

#323

Post by refurb »

gnepon wrote: post #319
listenallyall wrote: post #303

Earlier quoted context omitted.

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.

There is no objective definition of fairness.

That’s your definition

By your definition if someone works 40 hours, after taxes they should have the same amount as someone who worked 20 hours.

That doesn’t seem fair to me

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

#324

Post by throwaway2037 »

beezle wrote: post #236
throwaway2037 wrote: post #127

Earlier quoted context omitted.

Nice link. Thank you to share. This notice bothers me a bit: > IBKR will assess a surcharge of 1% on large loan balances unless otherwise prearranged with IBKR. The 1% surcharge would apply to all balances in the highest tier. I wonder what exactly "prearranged with IBKR" means. Call them up... "I need to borrow 50M USD, and pledge my Meta stock." Them: "Hang on. Yeah, sure." My guess, if the loan is large enough, th…

For many things, IB is great. Certainly if you are a futures trader it is very good, same for most equity/option trading. But for bond trading, expect a complete nightmare at tax time. Their "tax department" has no clue how to properly and consistently amortize bond premiums and quite honestly (personal experience) does not give a rats.

    > bond premiums
Does this mean you are buying bonds with a price greater than 100%? If yes, can you explain why? On the institutional side, there is an allergy to premium bonds; they only want to buy at par (100%) or less, so normally the coupon rate is adjusted just before issuance to meet their needs.

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

#325

Post by chgs »

rijoja wrote: post #185
chgs wrote: post #170

Earlier quoted context omitted.

> in many cases this can't be paid without selling the asset. Ok. And? Why should someone get $5m for doing bugger all. If they were paid $5m for cleaning a car they would lose a fortune in tax.

idk, maybe because their parents liked them? Do you really want to incentivize against people working hard to make sure their offspring, has a good life? Also a family-home might have sentimental value, and this really doesn't only apply to rich people, quite the contrary actually.

My employer likes me and gives me $100k and I have to pay tax.

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

#326

Post by gnepon »

refurb wrote: post #323
gnepon wrote: post #319

Earlier quoted context omitted.

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.

There is no objective definition of fairness. That’s your definition By your definition if someone works 40 hours, after taxes they should have the same amount as someone who worked 20 hours. That doesn’t seem fair to me

This is the kind of extreme internet Libertarianism that's dangerous in the real world. Not practical or concerned with extreme poverty through inequality, but preferring to fight on first principles, like all tax being theft (not your claim, but equatable).

I'm less concerned about the definition of fairness and more concerned about real human suffering.

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

#327

Post by rijoja »

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 interesting, I know that other countries do the same, however, but I was thinking about it as a general principle.

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

#328

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…

(Probably a bit late to the conversation but whatever)

> You have gained income from your capital at this point.

Let’s say Jeff Bezos wants to buy a yacht. He has 1 million amazon shares worth 1 cent when he started and now worth 100 dollars. So he can sell the shares to get 100 million dollars and buy the yacht. But he has to pay 10% capital gains.

Or he can borrow 100 million from any bank and they will accept the shares as collateral. He does not pay capital gains at this point

My take on this is that is a freely entered into contract at which Bezos values his shares at 100 million. And he gains use of the wealth of 100Million (debt balance is not relevant here)

Think of it as like the Duke of SomethingShire. He can rent out his land to farmers etc and get an income. That’s fine. But if he then borrows a 100 million against the land of the shire, and buys a yacht with it, then he has gained from a chnage of the capital - I just don’t see this as a private shielded from tax decision.

I think there is a further issue in that Amazonnshares do not generate much income (not much in way of dividends). This leads to the general problem of tech shares in that it’s always a greater fool valuation. But warren buffet talks much better about dangers of valuing shares without income streams than I do.

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

#329

Post by next_xibalba »

mcculley wrote: post #268
next_xibalba wrote: post #231

Earlier quoted context omitted.

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.

You have projected your bias onto my comment. I do not advocate for an estate tax and don't necessarily support it. And claiming that opposition to an estate tax is an opposition to the success of other people's children is also definitely not anything I believe or claim. Our economy is not zero sum. Everyone can win. Also, redistributive policies almost always fail and waste vast sums while failing.

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

#330

Post by eadmund »

lifeisstillgood wrote: post #328
eadmund wrote: post #171

Earlier quoted context omitted.

> 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…

(Probably a bit late to the conversation but whatever) > You have gained income from your capital at this point. Let’s say Jeff Bezos wants to buy a yacht. He has 1 million amazon shares worth 1 cent when he started and now worth 100 dollars. So he can sell the shares to get 100 million dollars and buy the yacht. But he has to pay 10% capital gains. Or he can borrow 100 million from any bank and they will accept the…

> Or he can borrow 100 million from any bank and they will accept the shares as collateral. He does not pay capital gains at this point

Nope, but when he does sell those shares, he will (except for the step-up in basis rule on death).

And he has to make payments on the loan, which has to come either from income (which is taxed), sales of capital (which is taxed) or other loans (which will then be paid off with money which will ultimately be taxed in some way). Remember that the loan is a liability.

The only issue here is the step-up in basis. Everyone gets distracted by the big loan, but ignores the actual step where taxes can be avoided. If we eliminate the step-up in basis then there is no non-taxable issue.

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