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Buy, Borrow, Die – Explained

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Re: Buy, Borrow, Die – Explained

#381

Post by 2Gkashmiri »

TrackerFF wrote: post #85

It always puzzled me how tax-adverse some wealthy people are. I'm not talking about the wealthy people that have 100% of their wealth tied up to company (stock) that they operate - but the wealthy people that are just asset-rich, with zero operational duties. Their wealth is handled by wealth managers, they probably don't even know what they own. But minimizing taxes and hoarding wealth is priority number 1.

Dont know about the US but in India, you pay sales tax on EVERYTHING you buy. Doesn't matter you are rich or poor. You pay this tax.

Want to buy an expensive car? Prepare to pay upwards of 100% car value in taxes.

Same for cigarettes. Around 200% tax just to give 2 examples.

Now, you "can" save your income tax by sleights of hand, by showing more expenses than actual or by misreporting things but still, you dont always get to pay 0 tax. That never happens.

Re: Buy, Borrow, Die – Explained

#382

Post by kgwgk »

doe_eyes wrote: post #196

This kind of an explanation overlooks the obvious issue: you're exposing yourself to asset valuation risk. We don't tax unrealized gains for that exact reason. Let's say you have $10M in in index funds. You don't want to cash out and pay capital gains, so you get a $5M credit line with your stock as a collateral. Then, there's a market crash, your collateral is all of sudden worth just $4M, and you have a bank knocki…

> We don't tax unrealized gains for that exact reason.

I may be missing your point but the example you give looks like an argument to tax unrealized gains.

> Let's say you have $10M in in index funds. You don't want to cash out and pay capital gains, so you get a $5M credit line with your stock as a collateral. Then, there's a market crash, your collateral is all of sudden worth just $4M, and you have a bank knocking on your door - but you already spent $5M on a McMansion. Now what?

Now you have a problem caused by leverage - and it was at least in part because you didn't want to pay taxes. If unrealized gains had been taxed just the same the concern about paying taxes when cashing out would disappear.

Re: Buy, Borrow, Die – Explained

#383

Post by ohashi »

throwaway22032 wrote: post #177
ohashi wrote: post #174

Earlier quoted context omitted.

If that home is over 10, 13 or 20m dollars... you can pay tax on it. If you have siblings, I assume it would be divided between you, so multiply value by siblings. If you got a home worth that much, you can pay some taxes on it. https://www.mansionglobal.com/articles/more-than-1-500-homes... 1,500 homes sold for over 10m in a year. We're talking about the richest of the rich. That's exactly who should be paying some…

I can pay taxes on one dollar. It's the principle. In my country our threshold is significantly lower by the way - it's around a million, so bog standard houses get hit by it. I think that inheritance taxes are wholly equivalent to wealth taxes, e.g. "you have a thing, I like that thing, give me that thing", and therefore morally wrong. I could agree with them on the basis that the money were minimal and solely used…

Basically, you don't believe in government except to protect you from others who might take, while you have would have to ability to take advantage of others freely. No basic humans should be satisified by the government.

That's exactly what the ultra wealthy seem to generally believe too. Sorry that many of us reject your premise that you should be freely protected to screw over everyone else and think that's a moral decision (it's not, but I won't waste my time).

Re: Buy, Borrow, Die – Explained

#384

Post by intended »

AnthonyMouse wrote: post #366
intended wrote: post #353

Earlier quoted context omitted.

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 p…

> Firstly - many developed countries have higher tax rates than America. This is mostly not true. People are often confused into comparing US federal taxes to the totality of taxes in other countries, but US states levy taxes too. The total of state and federal taxes is often in excess of 50%, which is higher than the OECD average. > The issue is that tax avoidance for so many years has resulted in absurd levels of w…

>This is mostly not true.

I went to double check, and the best answer is that America collects less tax/GDP than its peers. Even accounting for state and federal taxation.

https://www.taxpolicycenter.org/briefing-book/how-do-us-taxe....

> Taxes on personal income and business profits made up 48 percent of total US tax revenue in 2021, a higher share than in most other OECD countries, where such taxes averaged 34 percent of the total (figure 2). Australia, Denmark, and New Zealand were the only OECD countries where over half of total revenue was generated from such taxes.

> In the United States, taxes on just the income and profits of individuals (not businesses) generated 42 percent of total tax revenue, compared with 27 percent for all other OECD countries combined.

So that clarification is warranted.

> Convoluted taxes

This … I mostly agree that simpler tax codes are beneficial, I am not sure its complexity is the core reason discussion is difficult.

Tax payment itself is made as painful as possible, so that it remains a focus of ire for citizens.

Hmm. I suppose in the spirit of simplicity, it would be ideal to have an automated tax generation form, and a simple tax code - making it easier for people to just pay their taxes and get on with their life.

And then have progressive taxes for people higher up the wealth ladder.

> Market concentration

Your point is that this is not the primary reasons for wealth disparity?

I dont know - we are well aware of the kind of steps firms take to avoid paying taxes, and instead move them to tax havens. The numbers indicate that firms tend to pay much lower taxes in America compared to their OECD peers.

Again - the point here is on “primary reasons” for wealth capture.

Re: Buy, Borrow, Die – Explained

#385

Post by intended »

AnthonyMouse wrote: post #380
intended wrote: post #377

Earlier quoted context omitted.

> “incumbents want fewer regulations” Just to be clear, you are quoting typical lobbyist talking points here? I definitely disagree with such a simplification. I agree with the fact that incumbents want to make it easier to make money. > This is completely the opposite … Yes, I am in firm agreement that the content, quality and enforceability of the regulation matters. That said, I used contracts as an example, speci…

> Writing up a contract is more expensive than trusting someone’s word, it is fair to say that having no contracts would enable more small businesses to flourish (lower costs). But now we're back to "what the regulation is matters more than how many there are". There can exist rules that benefit small companies, obviously. But if the rules every company has to comply with can fill three shelves at the library, this i…

> we're back to "what the regulation is matters more than how many there are

you and me are back to this.

Most arguments dont get this far, unless these answers are first furnished. Which was the spirit and intent of my parent comment.

And I agree, good regulation is better than absurd regulation.

> ostensibly neutral… small companies can’t sustain

Sure.

Re: Buy, Borrow, Die – Explained

#386

Post by CalChris »

WorkerBee28474 wrote: post #121
CalChris wrote: post #63

I implicitly understood Buy, Borrow when CEOs making a $1/yr became a thing. That seemingly hairshirt salary is publicly reported. I didn't foresee the Die part because it is affected in private.

CEOs making $1/year is more due to Clinton's 1993 law against deducting CEO pay above $1,000,000 from taxable corporate income. Before that CEOs were happy to be paid normal salaries and pay normal tax on them.

That $1M cap rose year by year. According to ProPublica, it was $8.2M in 2014.

https://www.propublica.org/article/the-executive-pay-cap-tha...

Re: Buy, Borrow, Die – Explained

#387

Post by 2-3-7-43-1807 »

would this be an eli5?

A owns assets worth of $500M and wants to turn it into cash. Selling it would require him to pay income taxes on past appreciations. So, instead he'll get a loan worth somewhat less than $500M and uses the asset (as is or transferred to a Trust) as a collateral. He wastes the cash from the loan and eventually dies. Now the bank gets the collateral and nobody ever paid a significant amount of taxes.

Is that it?

Re: Buy, Borrow, Die – Explained

#388

Post by adastra22 »

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.

In this particular case that I had in mind when writing this comment, they were arguing for foregoing a tranch of money entirely because it would be taxed at income rates instead of long term capital gains, which would make their %age tax ratio go up, and massively increase the total tax paid.

They would have rather foregone that income entirely, then be forced to pay full income taxes on it. Of course they didn’t argue it this way, or else the idiocy would have been obvious even to them. They were arguing that plan B “results in less tax paid overall.”

That is what their metric was: which plan results in less taxes paid. Not which plan results in more take-home pay.

Re: Buy, Borrow, Die – Explained

#389

Post by adastra22 »

intended wrote: post #352
chii wrote: post #337

Earlier quoted context omitted.

> 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 avoidan…

FWIW this person was Canadian.

Re: Buy, Borrow, Die – Explained

#390

Post by relaxing »

WalterBright wrote: post #330
relaxing wrote: post #164

Earlier quoted context omitted.

By doing what? Letting their tax preparer select the EITC? Calling that a “Try” is stretching it.

Contributing to an IRA or HSA.

Most people do not do those things.

And if they do, they’re likely not doing it with tax reasons in mind.

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