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Buy, Borrow, Die – Explained

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Re: Buy, Borrow, Die – Explained

#351

Post by johnnyanmac »

WalterBright wrote: post #328
johnnyanmac wrote: post #297

Earlier quoted context omitted.

Guess it's easy to talk this way as someone who isn't that rich, but if I'm at the point where I have 8 figures accessible, or 7 figures liquid and own all the important assets (house, car, kids' college funds in 523, etc), I don't particularly care what part of my income is being taxed past that point. My goal isn't to make money for money's sake. Nor even leaving oodles of money to my kids. I'd metaphorically just…

People who acquire money simply reset the goalposts. ESPN recently did a movie on what happened to poor people who suddenly became multi-millionaires when they joined a pro sports team. TLDR: they quickly spent it all and wound up with nothing. It turns out to be amazingly easy to burn through a million dollars.

I can't refute that. while I arguably (by my family line's standard) came into "life changing money" I also did have a bunch of upbringing from family, education, and second hand experience to take steps to avoid that. But I agree that words are cheap, and 6 to 7 figures is yet another magnitude of life changing.

On a similar note, I do understand the peer pressure that comes with being on a team like that. "tradition" where you buy your entire team dinner for a night on the order of high 5 figures as a start. I can start to sympathize with how that spirals when the environment itself pressures you. More reason to make a financial planning class mandatory in school. Won't save everyone, but it'll at least bring awareness.

Re: Buy, Borrow, Die – Explained

#352

Post by intended »

chii wrote: post #337
adastra22 wrote: post #313

Earlier quoted context omitted.

Nah I’ve met a fair number of mega-high wealth individuals. They would go so far as to pick a materially worse deal that allowed them to pay no taxes, over a higher payout that required some taxes paid. It is nuts.

> They would go so far as to pick a materially worse deal that allowed them to pay no taxes, over a higher payout that required some taxes paid. I find that hard to believe. I highly suspect that the "materially worse" deal you speak of is simply less liquid cash, but more retained wealth.

Given American anti tax sentiment, it isn’t surprising.

Plus there is a concerted effort to maintain the narrative that the government should be starved, because the government is the most wasteful body that can be.

Being rich isn’t just some sort of statistical metric - it’s also a clear cut option to have your principles and desires accommodated.

It’s not hard to believe.

To determine whether its 60-40 (tax avoidance - convenience optimization) would seem to be the question to pursue.

Re: Buy, Borrow, Die – Explained

#353

Post by intended »

valval wrote: post #329
adastra22 wrote: post #313

Earlier quoted context omitted.

Nah I’ve met a fair number of mega-high wealth individuals. They would go so far as to pick a materially worse deal that allowed them to pay no taxes, over a higher payout that required some taxes paid. It is nuts.

It might be they’re just against taxes. How could that be a surprising thing to you? In democracies, the massive bulk of people are voting to steal the money of the rich. That’s not cool.

In democracies, the minority who own the bulk of wealth are lobbying to ensure they avoid paying taxes. That’s not cool.

Firstly - many developed countries have higher tax rates than America.

Secondly - the issue isn’t being rich. The issue is that tax avoidance for so many years has resulted in absurd levels of wealth capture.

Thirdly - no polity level discussion can happen effectively, because that wealth ensures productive discussion is mired in controversy by the time it reaches the voting public.

Re: Buy, Borrow, Die – Explained

#354

Post by intended »

barbazoo wrote: post #215
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?

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.

Please note - this is a more modern belief. Something that solidified in the zeitgeist post 2008.

If you go to early Reddit, you will see it a staunchly pro market, anti tax stronghold - as was HN.

For eons, “competition” was the mantra along with “greed is good”. Many people who own wealth reached there with that ethos.

No one has to “contribute more”. That’s the opportunity for whichever bright eye person decides to take advantage of the gap in the market.

If you want a counter to this dogma -

1) Yes. Market inefficiencies should be open as opportunities to the industrious

2) No. Not all market inefficiencies are the same. for example, Public goods (police, military) are not better off with multiple companies. Insurance is similar.

3) Lobbying for convenient rules, lobbying for weakened regulators has given far more advantage to firms, which then use that wealth to become rent seekers. They dont need to innovate, because they can litigate.

4) “more regulation means higher compliance costs” was a new one I saw. Guess what - if your firm uses contracts, that’s a compliance cost. Why not just do it by a hand shake? Save your lawyer fees.

Compliance costs ensure fair play between entities of unequal strength. You can trade on your competitive advantage, not on the tertiary strengths, such as a firms ability to pay for a better legal team.

Edit: Soap box - This is about Personal Responsibility.

The place where most people agree today, is the desire for a fair fight.

How can I reasonably defend the idea of personal responsibility, in something like the sale of NINJA loans.

If firms field trained, resourced, networked sales people to sell loans to people who have a negligible chance of even understanding what they are getting into, then how do I reasonably bring up personal responsibility ?

Can people reasonably be expected to read all the contracts they have signed? ( Netflix, Uber, gmail, phone, etc.)

Algorithmic ads are fine tuned to grab your attention and keep you online. There is more money spent on UI UX research than the GDP of some global south countries.

Forget America for a second - imagine how regulators in smaller economies handle these things. Heck, that’s if they even have time to worry about these things.

Re: Buy, Borrow, Die – Explained

#355

Post by opo »

Well it certainly is convenient that a "private wealth attorney at an international law firm" decided to go on Reddit and talk about tax policy a short time after there is a proposal to tax unrealized capital gains.

There are many web sites that claim this is rampant and from what I can tell the idea of “buy, borrow, die” was developed by Professor Edward McCaffery back in the 1990s, but are there any actual reliable stats on how many lifetime low interest loans are being given out? How would such a lender stay in business? Lenders with that kind of capital can't find something more profitable than letting someone have hundreds of millions of dollars of money for decades and maybe hopefully the stock market isn't in a bear market at that time and they can get their money + .5% interest and some of the capital appreciation? It is very common to make short terms based on using stocks, etc as collateral. But how common is it to have a lender be ok with deferring interest for decades until the person dies? Not saying there aren't stupid lenders, but doing a quick search, I have not found one stat on how many lifetime loans like this are actually being done.

There is a treasury department page claiming that about 160 billion dollars in unrealized gains are not being taxed, but that isn't talking about stock being used as collateral, that is talking about simply the value of assets increasing - that is entirely different.

According to this: https://finance.yahoo.com/news/jeff-bezos-sell-5-billion-185... Bezos has sold around $13.4 billion in stock in 2024. If he could easily avoid millions (maybe billions) of dollars of capital gains tax by this one simple trick, why wouldn't he have?

Re: Buy, Borrow, Die – Explained

#356

Post by dendrite9 »

shigawire wrote: post #344
LVB wrote: post #339

Earlier quoted context omitted.

I’ve gotten to see some of that at a local level and… I just don’t know. We barely managed to pass a local school levy to recoup from a major accounting error that would have meant massive layoffs for the district. It’s a pretty good district academically, and I was shocked at how many empty nesters (new ones, too) were vocal about voting no just because “no new taxes“, despite all of their kids consuming that very s…

The way I (not the previous poster) envision this working is not that you can opt out of taxes, but you can skip certain items. So I don't pay Israel's defense budget, but that money is reallocated evenly to everything else. I find it hard to believe a meaningful number of people would opt out of libraries and schools assuming their overall tax burden is unchanged.

This sounds like a good way to accidentally create an industry of reverse lobbyists where the government contracts them to convince tax payers to allocate money to their department.

I might be too pessimistic though, I tend towards liking the idea but I'm concerned about the changes it could cause.

Re: Buy, Borrow, Die – Explained

#357

Post by chii »

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…

> “but the ultra-rich get special low-interest loans”

If you are rich, and is not borrowing at high LVR, it means the lender has a reasonable belief that you can pay back the loan (and the collateral is also good). The lender _can_ give you a lower interest rate, due to the loan market being pretty competitive, because they take on less default risk compared to a non-rich person taking the same loan.

it's not gonna be a massive difference, but for large sums, probably does make a difference worth doing.

Re: Buy, Borrow, Die – Explained

#358

Post by Propelloni »

valval wrote: post #331
zb1plus wrote: post #292

Earlier quoted context omitted.

I've always said people should be able to directly allocate where their taxes go within the government expenditures, or be able to file an objection based on religious or philosophical beliefs to having their tax dollars fund morally objectionable things. I would be much happier to pay taxes if they went to funding schools, infrastructure, NASA, emergency management, poverty relief and other useful things instead of…

[flagged]

> Supporting the war in Ukraine is just another example of “bombing brown people”, yet you appear completely oblivious.

How?

Russia invades the Ukraine. Ukraine defends itself. Ukraine's allies, incl. the USA, send weapons. None of the allies, incl. the USA, fight in Ukraine or Russia.

I'm afraid your independent thinking has formed a prejudiced opinion. George Carlin would not be proud.

Re: Buy, Borrow, Die – Explained

#359

Post by Thorrez »

bigstrat2003 wrote: post #278
ashkankiani wrote: post #86

Earlier quoted context omitted.

Make an exemption for a primary residence. Everything else can go. Stop letting people hoard wealth like dragons.

No. People have a right to their property, including wealth.

We're talking about what happens when someone dies. The estate tax already exists. Is that a violation of the right?

Re: Buy, Borrow, Die – Explained

#360

Post by Thorrez »

jongjong wrote: post #99
bhauer wrote: post #51

Earlier quoted context omitted.

The step-up in cost basis on death is the original sin that underpins the entire debate over unrealized gains. It's disheartening to see so much thought and deliberation going into an obviously toxic idea (taxing unrealized gains) when the obvious solution (removing the cost basis step-up when assets change hands) is being ignored. Inherited wealth is the least earned, so it should be politically palatable to change…

>Inherited wealth is the least earned Let's be real. No wealth is 'earned'. It's almost entirely luck and social connections. No different from inheritance. Besides, inheritance can be hard work, psychologically. Your parents may be in a very different socioeconomic group than you for most of your adult life. Your baseline expectation for a 'normal' lifestyle is somewhat elevated (due to the lifestyle you experienced…

>No wealth is 'earned'.

What about the crazy hours that doctors often work?

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