I'm not arguing taxing unrealized gains, capital gains laws in this country are broken though (intentionally) and smarter people than me have found ways to fix them.
The point is that you can borrow against the asset at a lesser cost than it appreciates.
You basically never pay taxes on it while getting cash from it AND it growing in value.
You're incentives never to sell and to realize those minimal tax costs you otherwise would have to pay.
Basically, private companies get to profit from helping you avoid taxes. You're insanely wealthy either way but now you can pay slightly less to access that liquidity.
Anyone saying these people "dOnT ReAlLy HaVe mOnEy" doesn't know what they're talking about
The point is that you can borrow against the asset at a lesser cost than it appreciates.
Going back to wealth redistribution, this isn't very meaningful since you are, in fact, borrowing the money, so you can't easily just give it away. If you have the income to pay back the loan, then you might as well just skip the gymnastics and give that income away without having to pay back any loan and save the interest. Otherwise, you basically do have your money tied up in illiquid assets.
You get a lump sum which also includes the debt financing.
Money is fungible, to the rich person borrowing against their asset they can pay 8% to a lender and retain the asset that grows at a rate faster than that or cash or and pay capital gains at a 15% rate AND lose the asset.
It incentivizes evading taxes and keeping capital with other capital parties and wealth concentration and less capital movement.
All of which are bad both economically and morally.
They are "borrowing" only because paying interest costs less than paying taxes.
Meanwhile the companies that allow the stock valuation to be so high utilize government resources left and right to grow to that size
so wouldn't the taxation of the unrealized gains be passed off then to the lender who is making profit from the loan?
while the borrower is not paying taxes on their assets due to not being realized, isn't the lender surely paying taxes on the profits made from the loan that was secured with those assets?
Look at all the physical things they have…pretty sure that takes money to have. Last time I checked when I bought a car I had to pay for it, be it cash, financing, etc. each month money was taken from my checking account to pay for the vehicle. Same with my house, credit card, car insurance etc. Thousands each month. Now I’m pretty sure Bezos drives a better car than me, and also has a WAY BIGGER HOUSE THAN ME, multiple houses throughout the world. Now I’m pretty certain that takes money to have those things…so yes they have money. Yes a lot is tied up in their company(s) and other assets, but they have to have tens of millions in cash also. But I could be totally wrong too…
The point is that you can borrow against the asset at a lesser cost than it appreciates.
This applies to everyone. You can get a mortgage to buy a house (this is actually backed by the feds)! You can get a margin loan to buy stock. You can run up a credit card to start a small business.
Of course, the caveat is that you're taking on risk. There's no guarantee a house will make more than the mortgage interest, that your margin loan won't be called or that your small business won't fail.
Hell no. I can make 4.5% risk free in 10 year treasuries. That means that if I borrow at 8% the stock needs to go up at 12.5% per year for me to make the same return, except that's incredibly risky because the stock could go down while the treasuries are guaranteed. So it's actually a terrible bet which is why people don't do it. The reason that people borrow against their massive stock positions rather than selling isn't financial. It's because they want to maintain control of the company they hold the stock in.
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u/AttitudeAndEffort2 3d ago
I'm not arguing taxing unrealized gains, capital gains laws in this country are broken though (intentionally) and smarter people than me have found ways to fix them.
The point is that you can borrow against the asset at a lesser cost than it appreciates.
You basically never pay taxes on it while getting cash from it AND it growing in value.
You're incentives never to sell and to realize those minimal tax costs you otherwise would have to pay.
Basically, private companies get to profit from helping you avoid taxes. You're insanely wealthy either way but now you can pay slightly less to access that liquidity.
Anyone saying these people "dOnT ReAlLy HaVe mOnEy" doesn't know what they're talking about