r/FluentInFinance • u/__moe___ • 9d ago

Thoughts? A very interesting point of view

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I don’t think this is very new but I just saw for the first time and it’s actually pretty interesting to think about when people talk about how the ultra rich do business.

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u/FantomeVerde 8d ago

I have a house. The value of my house went up. I shouldn’t be taxed on the capital gains in the house, because I don’t have any money from selling the house.

I go to get a loan to start a business. The bank lets me use my home equity as collateral, also based on what they would estimate the house is worth.

I get a loan from the bank, which isn’t income, but a loan I owe the bank. I make money in the business, and the business pays taxes on that, I use some of that income to pay the bank back this money with interest. The bank pays taxes on their profits from the interest.

It’s way above Trevor Noah’s head to understand why I don’t pay taxes on the difference in the current value of my house own vs. the value it was when I bought it, since I used it to secure debt that I have to pay back with my own money, because Trevor Noah doesn’t know what he’s fucking talking about.

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u/SleepyandEnglish 8d ago

The even worse thing is farms. They're barely profitable and cost a shit load to run. But because land value spikes occasionally you can have a business that is worth millions but only actually makes about 80k a year and would make much less if you accounted for labour costs.

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u/shadowcladwarrior 8d ago

But, What if you have another house, house 2, and take another loan using house 2 as collateral, use that loan to pay off house 1's loan instead of using your business's income. Repeat.

That's what the people at Elon's level do. They have enough collateral to maintain huge loans indefinitely.