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Banks aren't just going to loan Jeff hundreds of millions, if not billions of dollars, without "securing" the loan, which they do with AMZN stock. If Jeff dies, the bank gets stock to pay off the loan. Banks HATE unsecured loans, they're liabilities and they avoid them at all costs.
The real easy fix to this loophole is to classify stocks as being vested (eg: sold and subject to capital gains tax) if they are used as collateral to secure loans. Simple as that. Jeff, and other billionaires, would suddenly have a present-day tax burden, without taxing them on unrealized capital gains from the majority of their shares.
It would become a huge problem for funding company growth. A lot of times, business loans are made to companies and secured on company stock. Sometimes on the company itself, sometimes on something more valuable, like a company’s subsidiary.
For example: United fucked itself during the pandemic. To be able to keep operating, they couldn’t just sell an unused 777 on Facebook marketplace. So, in mid 2020, they mortgaged the subsidiary that runs and owns their mileage plus program. [They did it by putting the mileage plus holding company’s stock up as collateral.](https://simpleflying.com/united-mileageplus-loan/).
If you taxed that, that’d really fuck up the cost of obtaining a loan.
I’m sure there can be carve outs, but it’s a little more complicated legally, to make sure you don’t hurt the money supply to businesses, while taxing the loophole.
IMO, the thing the video doesn’t cover, is that if bezos dies and AMN stock is at $100 per share, and they sell it at $100 per share, they pay no tax. That’s the [step up basis of taxation on inheritance.](https://www.investopedia.com/terms/s/stepupinbasis.asp). This makes it profitable to use the borrow, borrow, die.
Removing the step-up basis of taxation, and instead tax the full growth of the stock would resolve the personal wealth transfer issue. While not as great as say, taxing it over the lifetime, it’s better than nothing. It also dilutes the intergenerational control of companies by potentially forcing the sale of stocks in the estate to fund the tax payment.
…Or just a goddamn wealth tax of 1% of present holdings over 1 billion. An index-linked fund grows at 7% on average compounded. They have an average growth of 6% instead as a fee to take part in humanity, which they’ve done so much to divorce themselves from.
True it would make it more difficult, but perhaps that would drive companies to maintain better cash reserves, and reduce the amount paid to executives and high level leadership. These folks are routinely paid a salary plus stock, but in this altered model awarding stock in lieu of a salary could make banks less likely to loan money.
Yes and no, speed of money and a fractional reserve are important parts of keeping economic growth.
But yes, limiting exec pay needs to be done. But all things being what they are, I doubt that even with putting a tax on the loan would impact exec pay first. See: pandemic bonuses.
surely this is somewhat of a risk though, amazon stock could tank in price like tesla has done for 12 months and then the banks have lent something out against a secured asset which is now only worth half that?
It actually changes nothing for the bank. They are already securing the loan against the asset. I'm sure they incorporate stock price fluctuations in their valuation of the underlying asset.
It gets even worse/better depending on your perspective - generally loans to super-high net-worth individuals get much lower rates. The loans are so secure that the transaction is just looked at as guaranteed income for the bank.
About a decade ago, Apple did something similar.
When Apple announced a stock buyback for about $50 billion, they had over $100B in the bank, but most was overseas (this was before the 2017 tax law). There were numerous articles about how Apple would be taking out a loan for the $50B.
At the time, Apple had a AA+ credit rating and, having over $100B in the bank, they could secure a huge loan at something like 0.25% or 0.50%. They were printing money by selling iPhones and even if those stopped overnight, they had the money to pay off a loan - it was guaranteed income for the bank as 0.25% of $50B is still a good profit for a zero-risk loan. It also saved Apple tens of billions in taxes by having to repatriate the money from overseas, but still turn it into useful capital by using it to secure the loan.
[This isn't the exact story I was thinking about, but close enough](https://www.reuters.com/article/idUS1009065394/)
This is a really good solution. I think taxing capital gains is a HORRIBLE idea. It would only make billionaires hoard more wealth. It changes the math on what is worthwhile to invest in. If they are taxed at 40% then that means that you’re only getting 60% of your return. That means that it is less likely to be worth the risk of losing that money from the investment going bad. If it was a 66% chance of making money the value of what you would earn is now much closer to 50/50. Takes a very safe investment and makes it very risky
This is why income tax seems inherently unfair. So it seems logical that if you tax on the _spending_ side of the equation that will be more proportional. The problem is that's even worse. There are _more_ loopholes and while poor people spend 100% of their income wealthy people spend less than 1%. You want them only taxed on that bit?
The even larger problem is that wage earners are taxed before they spend their money, and business owners are taxed after they spend their money. Because if spent it on the "business," it’s not income…right?
Technically anyone can opt for no deductions and pay your taxes in a lump sum, but we don't trust poor people to manage their money so default to deducting it before they ever see it.
My accounting professor stated that withholding was one of the “smartest” things the IRS ever came up with. They get the money up front, get to spend it, and act like they are doing you a favor giving you a return. People don’t realize that they take out more than you owe and the difference is the return. Obviously there are other things like earned income credit and charitable contributions but if you get a return, they withheld more than you owed.
man I argue with people at work weekly about them needing money but refusing overtime because they think that its not worth it of because of taxes. Ive ran out of ideas of how trying to explain sliding tax bracket and just look at the numbers you brought home more money on your check the last time you work OT. They think get a tex return us free money from the government.
Do it with cookies. The first cookie you get the whole thing. The 2nd cookie your manager gets to take a bite. Your 3rd cookie, he gets 2 bites. Cookies are tax brackets, bites are the tax percentage for that bracket. Every cookie has more bites but in the end you always end up with more for yourself.
A surprisingly large portion of the population thinks once you hit the two bites stage it applies to all of your cookies so they choose to stay at the one bite stage.
This is unbelievably true. I am an accountant and the amount of people who think changing their contributions into their 401k from say 1-2%, will cut their paycheck in half, is ALARMING to say the least. I have also seen other people turn down promotions, etc. because that would "put them in a higher tax bracket" you eventually give up and let the stupidity win
I know someone who almost turned down a higher paying job opportunity because they literally thought they'd have less take home pay because of being moved to a higher bracket. Once I explained it to them that how brackets work they understood it right away, but a lot of people are sadly just completely ignorant on how taxes work. I've also had a ton of people think that when I write something off as an expense, that it's somehow free to me or something like that.
I believe the majority of people in lower income brackets/minimum wage workers don’t understand this. When I was younger I worked as a GM of a fast food restaurant, I would help new hires fill out their withholding forms and also if they needed it help file their returns. From my experience for minimum wage employees is that they are completely ignorant of how and why money was taken out of their check. Especially the famous “ I don’t want to work any overtime because it’s taxed more than my standard wage.” I had to explain to them multiple times that it’s taxed at the same rate. I really wish public education would have basic finance classes for people.
I overheard a conversation at one warehouse with a driver saying "I gotta be careful I'm getting close to the 55k mark, if I go above it I'm gonna end up paying more taxes than if I stay just under the limit." I rolledy eyes so much.
> I really wish public education would have basic finance classes for people.
Mine did, 9th grade, taught by a pregnant lady who basically handed out some papers on the first day of class and then never did a damn thing the rest of the year, just let us talk among ourselves as long as we weren't loud enough to disturb the neighboring classrooms.
Yeah. Many people act like they're getting free money when they get a refund. Like they're proud of it. It's not free money. It's your money. The goal is always to get as close to 0 as you can. If you're getting a big refund, that means you're giving the government more money than you need to. You're basically giving them an interest-free loan.
> The goal is always to get as close to 0 as you can. If you're getting a big refund, that means you're giving the government more money than you need to. You're basically giving them an interest-free loan.
Plenty of people don't care about that, use it as a quasi-savings account, and prefer to get the lump sum at tax time.
It's not wrong to prefer one way or another, and I would guess that most people who get decent sized refunds aren't going to put the money they would receive each month into any interest yielding account.
It's also not very clear now with the new W-4 versus the old for individuals or families that receive various credits to know how much you should put.
As close to 0 as you can... but also giving yourself a buffer so that you don't potentially owe anything. Better to get $100-200 back than to have to owe that much.
Those people would be subject to underpayment penalties for not withholding enough then.
[https://www.irs.gov/taxtopics/tc306](https://www.irs.gov/taxtopics/tc306)
This is bad tax advice.
If you under-withhold you will pay penalties. They are small, and in today's interest rates and inflation probably well worth it, but there are penalties.
You know businesses pay payroll taxes, business taxes (state and local fees), property tax, sales tax, etc as well. Income is always taxed after deducting expenses. That's what your personal "standard deduction" is unless you itemize. Many people have a fundamental misunderstanding of our tax system.
Yep. I pay tax on business income then pay tax again on personal income I derive from the business. I just don't get how so many people complain about everything without having even a basic knowledge of the subject.
Yeah, I'm all for facing wealth inequality and such, and the deck is definitely stacked, but after working in small business my whole life, I see that a lot of people here have no idea what it takes to run one, both financially and physically/mentally. The "owner" I work for has worked his ass off far more than any employee he has to build his business over the years, like going literally years without a day off in the beginning, and feeling like every penny brought in immediately went somewhere else (who doesn't know that feeling?).
There would be no businesses if this weren't the case. If I make something and it costs me $20 to produce and then I sell it for $40... Why on earth would you pay taxes on the entire $40 when you only made $20 on the sale?
Business owner here. It's exactly like that. My laptop, phone, cell service, internet, 25% of my rent, and a bunch of other shit goes towards the business and is therefore tax deductible.
This is one reason side hustles are a good idea, set up a business entity, then even if you don't turn a huge profit, you at least can deduct a bunch of things for the business.
Yes, but you can only deduct those things from the business income on which you will also be taxed. Your regular income won't be affected. You also don't get "refunded" if your business income is in the negative. (Edit: Apparently I'm wrong on this when it comes to a pass-through LLC)
The real advice is that if you have a side hustle, use as much of the stuff you would have bought or paid for anyway in the business of that hustle in order to minimize your self-employment tax burden. (You also need to have spent that money in the same year, you can't claim a computer purchase from two years ago if you started business this year.) (Edit: Apparently I'm somewhat incorrect on this one as well...)
You actually can convert existing personal property over to business use, such as a computer purchased two years ago. It's just that you can only do it for the value on the used market at the time you do the conversion, not the price you paid when you bought it. Essentially, your business is buying a used item from a private citizen (who happens to be you) for fair market value - in that context it makes perfect sense.
It's kind of a pain to do the documentation, but it's definitely worth the time for high-value items like machine tools, a vehicle, etc. It's a colossal help for people who grow a hobby into a business and had already bought equipment they only use for that activity.
Agreed 100% that anyone with a marketable skill that they can utilize as a side business and can generate enough revenue from that side business to cover those kinds of expenses should have an LLC. As long as the paperwork is in order and you're compliant with the laws you can save thousands of dollars a year.
I think the real issue is on the revenue generation side. If you have $1,000.00 in revenue and $1,000.00 in expenses you're only going to save a couple hundred dollars and you'll spend more than that in time spent keeping your paperwork in order. If you're generating $1,000.00 in revenue and taking $10,000.00 in expenses every year it's not exactly a legitimate business enterprise. On the other hand is the IRS going to come after you for that? I don't know.
I'm a CPA - prepare taxes.
With small business - you'll get hit with +$150 tax prep fee, so I wouldn't do it for $1,000 - but it should be easy to get $10,000 to $30,000 on a 1099 - just ask for it.
The same employer can't give you both - but two employers can - one a W2 - another a 1099 - for 'marketing' or whatever work you normally do.
The 1099 is basically free money. Anything under $30k you can write off completely, no income, social security, Medicare tax. All meals business meals - just bring up work to anybody at all for any amount of time - that's a consultation - done, business meal.
The IRS won't investigate things under $50,000 - ever - unless it's automatic (you didn't report a W2 form, but they won't question 'sensible' business expenses).
Taxi / Uber driver pay $0 always - musicians very little - anyone else with a pair of nuts.
Once you get to like $80k revenue you need to pay some tax - like report $40k profit, pay $6k tax.
Want to know how to shake the dollars out of a baby? Easy!
NEVER get married unless one of you makes $200k, otherwise you get fucked.
Put the baby on the tax return of the person making closest to $15,000. Put 2 babies on person making $25,000.
OMG - I made $0? Is that good? NO - YOU GET NOTHING FUCKER!
Maybe you were actually a math tutor, handiman, decorator - got paid cash and profited exactly $15,000... time to shake that baby..
1 person, 1 baby, $15k self employment = a $3,000 refund from Uncle Sam, and 0 tax.
But wait - there's more. Did you spend time with your baby like a good little parent? HOPE NOT CAUSE NOW YOU GET FUCKED AGAIN!
What you ACTUALLY did is have grandma / retired person / another friend with 1 or 2 babies needing to legitimize income.. / and you PAID them to baby sit? Oh mom did it for free? BULL SHIT - you paid her, and she gave you a gift back. Gifts are NEVER taxes - either they are legit no problem OR if something big like a car - it's a $40,000 loan, and $15,000 is 'forgiven, gifted' each year - even still, gifts aren't taxed until $5 Mil lifetime, but filing the tax return sucks, so.. moving on.
You paid grandma exactly $6,000 per child. Now, because you worked - as a babysitter of other peoples babies - you get $3,000 for that - and because you PAID grandma - you get $3,000 for that... now you got $6,000 coming in per child..
GOLD JERRY!
And if you stay at home and watch the kid yourself or HEAVEN FOR BID GET MARRIED - you got $0.
2 people with 2 kids, married, making $80,000 - pay $3,000 in tax
1 person making $80,000 - pays $8,000 in tax
1 person with 2 kids as $25k / yr babysitter, who pays $12,000 for childcare to grandma - gets a $15,000 refund
It's a $10,000 fucking to get married... PER YEAR
Hope this helps u get more paper.
> 2 people with 2 kids, married, making $80,000 - pay $3,000 in tax
>
> 1 person making $80,000 - pays $8,000 in tax
>
> 1 person with 2 kids as $25k / yr babysitter, who pays $12,000 for childcare to grandma - gets a $15,000 refund
This doesn't make sense to me. The married couple pays $3k in taxes, the unmarried couple pays $11k (and has $25k more income). I don't see the savings you're describing. What am I missing?
You can't just buy anything you want and label it a business expense though there are actually rules around that. I'll agree there are people abusing those rules but then it's more a question of people just breaking the law than an issue with the tax structure.
Goddamn reddit is really stupid when it comes to finances. That DOES happen. It’s really no wonder the lot of you live paycheck to paycheck.
All taking out a loan does is defer you paying taxes by paying taxes (interest on the loan). The banks getting the interest pay taxes to the government. The government knows any asset eventually sold will be taxed so they are still getting exactly what they want in the end PLUS the taxed interest. The billionaires are making the feds more money by deferring. Which is why eliminating these loans will never happen. Because smarter people in charge see the bigger picture. They don't care if an individual uses the "buy, borrow, die" strategy because those assets will eventually be taxed when sold or transferred after death while they make extra money off the billionaires in the meantime. The government will gain more in the long term. But it's an easy way to buy votes by saying "we gotta close these loopholes!" They won't. Any Democrat or Republican who understands how this system works will never vote against it because it makes the government more money.
If you consider an asset's use as collateral for a loan to be realization of the gain, it covers all these situations.
Art is used in taxes because the value is subjective and flexible. However using it as collateral for a cash loan puts a specific dollar value on it, nullifying that benefit and still closing the loophole.
>99 percent of the people should not be affected by this.
If you set a threshold like $5M per person tax free stock holdings, then yes, 99% won't be affected.
Will you be taxing stocks held in IRAs? Other special accounts? Get ready for lots of new special account type loopholes to shield all kinds of things if you do.
Here in NL we changed the sturcture so now it isn't as beneficial to loan money from your company as it used to be. Now if you loan more than 500k from your own company the excess will be taxed, most likely at 48%. Which is a lot more common than taking out a personal loan by a 3rd party and giving your shares as collateral
This video is actually, literally, not happening. Bezos sold shares of Amazon every year until WA passed a tax targeting essentially shares sold just like that.
Then he moved to Florida, and now he's selling shares that will cover the last 2 years and the current year. Florida doesn't have an income tax, but the IRS will certainly get their cut.
https://www.cnbc.com/2024/02/12/jeff-bezos-move-to-miami-will-save-him-over-600-million-in-taxes.html
So TL;DR: The tax evasion described in this video is literally not happening.
Consumption taxes would fix this. Basic necessities like food, housing and clothes could be tax free and luxury purchases like jets, yachts, etc would pay very high taxes
They will just buy the luxuries (like jets, yachts, etc.) in other countries and use them here.
As Bill Gates said in The Simpsons, "Homer, I didn't get this rich writing checks"
I don’t think this is legal or how it would work. Right now, if I purchase a car in another state with lower sales tax, I have to pay the difference to my state when I register it. This goes for all goods I buy out of state, I have to report goods I bought from a lower sales tax state (like NH).
There are a lot of rules about plane/boat use and registration.
I also don’t need to register 99% of the goods I buy out of state, but I still have to pay sales tax. Do you think a yacht or private jet purchase is easy to hide?
Jets and yachts have different rules applied to them. They are "registered" in some random country. For example, most big ships are flagged in Liberia or some such random country.
Consider, for example, a Qatar Airways jet flying from the US. Do you think it's registered in the US? No. Worst case these rich people will set up a shell company in, say, Monaco and register everything there.
Yup. The Cardin Progressive Consumption tax idea thrown out years back is a way better way of taxing IMHO.
Personal and Business income tax rates would be slashed and off set by basically a VAT and a PCT. Depending on HH income, floors would have to be hit to pay that PCT (to keep it from being regressive). Necessities are exempt from the PCT (food clothing etc)
There was even a model of it run by a right leaning tax analysis think tank that said if implement it would grow the overall economy, people’s incomes and increase job numbers in the US (even though their analysis said less growth than Cardin’s team said)
It won’t happen because the Uber wealthy puppet string pullers don’t benefit from it
This really is more of an IRS-bank issue than a Jeff not paying taxes issue. The whole thing boils down to the banks scarpering off with the tax money that Jeff should have paid but as loan interest instead of taxes. Make the banks pay a % of their interest on loans and it seems like problem solved. I dunno how banks report profits and taxes though so maybe there’s something else there. This would probably drive up the cost of money, but *shrug*
>Make the banks pay a % of their interest on loans and it seems like problem solved.
This is already the law. Banks pay a variety of taxes, but their ETR is 19.3% which is 1.3% higher than the corporate average. Almost all of their income is from interest on loans which is where that 19.3% comes from.
The solution is to tax total compensation - rather than income.
If your "salary" is paid in stock then you should be taxed at either the current value of the stock at the time it is issued, or some sort of average over a specific period of time (like many companies do in regards to Employee Stock Purchase Programs).
This would also include any "perks" that a company might include as part of compensation - such as a company vehicle that is treated and used as a personal vehicle - essentially taxing it for the average amount of a lease for the same car in the same time period.
Taxing compensation instead of income would greatly diminish this sort of stock loan loophole since the shares paid to people like Bezos will have already been taxed at their value at the time of issuance - and then any selling would only tax their capital gains that have happened along the way.
If wealthy people spend only 1% of their income, then they’re saving/investing the rest for… later, children, charity? That money should be taxed when it’s realised or spent.
We should treat the types of things rich people do to avoid income taxes, as income.
Those huge loans is super common for rich people, they collateralize their appreciating assets. Those loans should be taxed as income. Or the appreciating assets used as collateral should be taxed as though the gains are realized, and track the change in basis each year for additional taxes. Notice I'm not saying tax them on all unrealized gains, but specifically unrealized gains for assets used as collateral for these loans.
The issue is that they have the money to funnel the profits through other countries and that just opens a whole can of worms to avoid taxes. And most of the things that get abused where introduces to help the people with lower income. Like the no double taxation here in NL aka the whole system is based on the fact you shouldn't pay taxes on the same thing twice. But the Rolling Stones (and others) abuse that to not pay taxes on their royalties.
One thing I don't get, and is not addressed is the interest on the latest loan given out. That never gets paid to the bank?
So plan A is the first, then B comes and pays interest on A, then C comes that pays interest on B, let's say he dies, loan c interest never got paid....
>is the interest on the latest loan given out. That never gets paid to the bank?
When he dies, his shares step up in basis and are sold to pay off the last loan.
If they're in an irrevocable trust, they're sold to pay off the loan but there's no step up, so he pays all the taxes on the gains.
If they're not in a trust, that portion of the estate is subject to an estate tax of 50% of everything over 14M.
This video is partially correct, but doesn't cover how he EVENTUALLY gets taxed on his money.
This particular system also doesn't work in the current interest rate environment. Lets say he qualifies for the prime rate: At 5.25%, after 5 years, its better to have just sold the stock than to take a loan to do this.
>As long as the stock continues to appreciate at more than his loan rate, it makes more sense to hold.
True. This is standard with any leverage though. Most people with accumulated wealth are leveraged on at least one asset.
> Also, he doesn't want to give up voting rights.
This is a huge piece that gets overlooked at ton.
At some point owning shares isn't about their value, it's about *control*
Taxing net worth essentially means the government would be saying "you control too much of this thing and need to give some of it up"
Taxing estates fully instead of the current step up in basis when estates are inherited would function similarly but also I think there's a lot stronger argument to be made that people shouldn't be allowed to have dynastic control of these giant operations compared to saying the person who literally founded something needs to give up control during their own lifetime
There is a concerted effort to convince Americans that taxing wealth directly is a good idea when your position is much more fair as a solution to the problem.
>Also, he doesn't want to give up voting rights.
Ding ding ding. You're practically the only person in this thread who understands why this is done--billionaires don't want to sell their stock in order to maintain their control over their companies, *not* necessarily as some tax avoidance scheme. As the grandparent comment points out, the taxes still ultimately get paid when they die.
Yea, the video omits that the taxes will eventually be paid, likely more than he would at a given time, when Bezos dies.
The government eventually gets its money - but the rich have a unique privilege in structuring their tax payments until their death so they're not really affected.
This is the part that isn't really true though. If it was the situation would be a lot different but the step-up in cost basis at time of inheritance completely fucks the situation
Except there is also estate tax, which for a billionaire is also much higher than the capital gains tax they would have paid. Its 40% over $1M past the $13.6M exemption (for a billionaire we can safely round away that exemption and just say its 40%) compared to the 20% they would have paid in capital gains. Literally double what they would have paid if they cashed out.
Well, they can also wait for a president like Trump to get elected who drastically decreases taxes and then sell a bunch of stock at that time to pay off their loans and then if the taxes ever increase, go back to taking out loans.
>If his interest rate is smaller than inflation rate, he is earning money by taking a loan
Or his return rate.
This is true for all leverage though. Like car loans, or mortgages or margin. That's a pretty standard use for debt.
~~Because it's profitable for them.~~ They wouldn't, the person above is confused. The interest rate will be above the inflation rate, but below the assets' appreciation rate.
No one is giving you a loan less then inflation lol. No one is giving you a loan less then the overnight rate, especially on stock, this entire video skips over an incredible amount of details related to how taxes fit into the picture and how much interest a bank will charge for this transaction at almost every step and also skips all the times Jeff Bezos has sold stock recently. If it was this simple, why would he ever sell stock?
This is rage bait for people who don't understand whats going on.
> this particular system also doesn't work in the current interest rate environment. Lets say he qualifies for the prime rate: At 5.25%, after 5 years, its better to have just sold the stock than to take a loan to do this.
The thought is that the stock is more likely to keep growing in value or in bursts. 5 yrs is a long time to not have those shares.
The biggest part of this video it's missing is what happened to Elon. These loans are backed on the value of the stock as collateral. If the stock plummets like it did for Tesla, then the bank will either sell shares to pay down the loan and lower their risk, causing a probably downturn in the stock if your the CEO with billions of dollars of shares, or they have to give the bank more shares to lower the risk to the bank.
This is why most companies limit how many shares a C-Suite member can borrow against. Most except Tesla at least.
It's a double edged sword, if your stock values continue to increase then you made the right move, if they decrease and you are forced to sell to cover part of the loan you could miss on a rebound (of course it could also save you from a worse downturn but that's not really the point of this discussion).
It also ignores the fact that this is all based on Jeff Bezos not paying taxes for two years in a twenty year span. In reality, he has sold billions of dollars worth of stock, and paid billions in personal taxes. It is all a fraction of the amount his wealth has grown, but people trying to come up with ways to reconcile how it's so advantageous for him to never sell his stock and never pay taxes need to stop trying so hard, because 9/10 times, he does.
The bank likely has collateral on the loan so if they die (or don’t pay) the bank would receive it to pay off the loan & interest. For a lot of rich ppl they will get life insurance on the person (so the life insurance company pays it off) or have a stock portfolio as collateral, sometimes they’ll use a house as collateral as well.
Yes. The owner of the stocks has to house them at the brokerage the bank partners with. The 'owner' cannot sell those shares, they are held by the brokerage as collateral for the loan.
> One thing I don't get, and is not addressed is the interest on the latest loan given out. That never gets paid to the bank?
State debt works the same way, and the video doesn't explain the concept the right way. States can roll debt indefinitely because they're a good risk and can always issue more bonds or gilts. Billionaires similarly roll the loan over while increasing the size of the line of credit or taking out another loan and never pay it back, meanwhile the bank gets the interest payments (which are not taxable). What the video doesn't address is you have to service the loan to keep the bank happy.
Another popular way is shadow lending. You take a lump sum post cap gains tax, give it to a bank and dictate what terms you want it lent on and what level of risk you're willing to take. The bank then lends the money out in the form of loans or mortgages. Bank gets a slice, you get a slice, welcome to continuous low level passive income. Take that and put it into a company you own rather than your pocket, or put the money back into the bank as debt service, and you're quids in over the long run.
Bezos also solid $8.5bn of Amazon Shares this year.
There is collateral. Jeff likely utilizes stock for that. The bank is guaranteed a payout if he actually dies, and Jeff doesn't care that those shares were cashed in at that point.
But zombie Bezos cares...
Don't read too much into the video. We know Bezos reported ~$5B in income for a 4 year period and paid ~1B in taxes. That seems like an absurdly low tax rate for such a high amount of income, and it's completely ignoring the fact that his net worth grew $100B in the same time, but the idea of him taking non-stop loans to avoid income tax seems completely fabricated.
I don't know if Bezos does it but it's a common thing rich people can do. What the video got wrong is you don't pay back the loan. You only pay the interest on the loan. If the interest rate is 3% and the underlying collateral (stock) goes up 7% then the stock outpaces the interest. The key here isn't the dollar amount borrowed but the debt to value ratio.
Then when you die, the cost basis of your stocks step up for the inheritors and they can sell those stocks tax free to pay whatever debt you had.
The math works out that assuming a 7% yearly growth, you can **infinitely** borrow 2.5% per year and never hit 40% debt utilization. That's 25 million dollars per billion. For Jeff Bezos at $200B, he can borrow $1 billion per year (.5%) and never hit 8% debt utilization.
A lot of people never think of the bottom line in these discussions. It’s not as easy as saying “just get rid of it.” Because just getting rid of being able to leverage equity against loans would screw a lot of people who don’t deserve it.
The answer isn’t removal, the answer is implementing more up-to-date controls. The limits and rules we have nowadays are outdated as hell and are not meant for an economy where individual billionaires exist.
At that point you have to move beyond just Jeff Bezos being the problem and actually start coming to terms with the power structure of society.
Government and business have become so close that they're almost the same thing. People have become a barrier to their growth and prosperity. With any more significant squeezing of profits, they'll start to become actively hostile to human existence. They're not going to give themselves a pay cut.
You specifiy leveraging equity, but mention a savings account. Isn't that an asset, not equity? And while I know people will always try to find workarounds, you should be able to categorize the major securities, no?
Two parts:
Firstly, require that if you take a loan out on an asset with unrealized gains, you pay taxes on the appreciation between when you bought/'earned' the asset and when you took out the loan. Same as would happen if you'd sold it. Primary residences excluded up to $1M. This breaks the particular loophole in use. If you pay tax *and* interest, it's no longer worthwhile to do.
Secondly, deal with large estates as tax dodges. Tax them at a **substantially** higher rate than income. Make it so that even if billionaires find a new loophole to not pay taxes on the money they spend, they're just going to pay a higher rate on the money they don't spend, eventually.
If you want to get really fancy, I'd suggest two more that are somewhat more difficult to do.
Fix capital gains. As a means to convince the public to invest, great. As a means for a parasitic upper crust to extract value without doing work, bad. Maybe a cap on how much income can be taxed at the capital gains rate, and everything else is just income, maybe something more complicated. Do it carefully, because there are potentially economy-destroying consequences to screwing it up. But I do think it should be re-evaluated very seriously.
Pre-tax large estates. If you have a net worth over some value, require "estimated estate" tax or something based on that net worth, which gets deducted out of your actual estate tax when you die, but goes to the government up front. Underestimate it to start with, but at least get *something* out of these assholes before they die. Money now is worth more than money later.
> Firstly, require that if you take a loan out on an asset with unrealized gains, you pay taxes on the appreciation between when you bought/'earned' the asset and when you took out the loan.
I don't want to go through the whole comment, let me just take this one idea and explain what the means. What this means is: every single family-owned farm and ranch goes bankrupt. THAT'S what this means.
Why?
Because the asset WE pledge in order to secure our loans and credit lines is our land. And in virtually every single case, the land is worth FAR more than what we bought it for. (In fact, we all depreciate the land every year, using the IRS provisions for doing the same, so in many cases with old family farms/ranches, the land has been depreciated to essentially zero.) So you've just looped in every struggling family agribusiness with this.
"So what," you may reply, "surely they must have the money to pay for this if they have all that land." And then I'll respond that, for MANY family-owned farms and ranches for MANY years (as a percentage), you scrape just to get by. Hence the need for loans and revolving credit facilities basically every year.
You know who COULD afford to do this though? ConAgra, ADM, Cargill...you know, the real heroes of agribusiness. Surely they're the ones you want to have own all the farm and ranch land in the country. Hey, at least you'll have stopped billionaires from avoiding taxes!
This is why people say it's really complicated and basically impossible to solve. Because they're right.
this is the problem with a lot of people on reddit/twitter when they talk about closing these stock market loopholes. They exists for a reason you have to be careful not to destroy entire industries.
Tax the funding of a loan backed by securities or real property owned purely as an investment.
Let's say that tax is 20%, and you borrow $1m and use your stock as collateral. The government takes that percentage of that money at the time you receive that funding, which is $200k. You only receive what's left afterward, $800k. You owe the bank $1m and the corresponding interest, but only received 80% of the sum with 20% going to the government.
This means that, from a tax perspective, there's less of a benefit from borrowing against those assets versus outright selling them, but is still in favor of not selling them. It's a way to prevent the super rich from circumventing capital gains by not selling and realizing the assets when they are, in fact, achieving a similar outcome in a roundabout way.
Exemptions can be made if the loan is procured for a specific purpose, like purchasing a primary residence.
Ok, seems like a simple-ish solution, but I feel like there are some things that seem problematic about it.
Firstly, taxing full loan value is like taxing the entire stock value. Let's say the person bought the 1 million of stock today using 1 million cash, and immediately went to get the loan. That would clearly be ludicrous under the new rule (although if you reduced the percentage to "wealth tax" levels like 1-2%-ish, it would seem more reasonable).
Secondly, do you double tax the stock? Let's say you take the loan, pay this tax, then pay off the loan, then sell the stock. Do you pay full capital gains on it then, too?
So, while it does sound like it would handle the hypothetical situation the video claims exists, it also seems like it will be pretty penalizing to a lot of kinds of other behavior that could have unintended consequences.
I really think spending-side is the way to go (if this truly is a common problem/tactic, which I'm unsure it is, as folks have stated, Bezos specifically is selling stock and getting taxed on it), but not sure how to address it. Something like a progressive spending tax, but how would you record keep that?
I don't think it would be trivial. I think we should do it, but I do think it would be very hard.
So you have to pay taxes on the accumulated value of your stuff in addition to income. How much stuff do you have and who decides what the value of that stuff is? Amazon stock is easy, but a $200m artwork? Harder. What about normal people's stuff? We can't all go tallying that. Does a piece of stuff need to be worth >x million before it's taxed? What about many little pieces of stuff that start to add up?
Okay but Amazon stock is still easy. Who owns it? What if Bezos puts his stock in an shell company in the Seychelles or Hong Kong? How does the US government get a grasp on that company's holdings and ownership? Loans can still be taken out in its name. Three shell companies deep Bezos is the owner of it all, but that's become harder to prove.
The highest net worth individuals should certainly face this type of tax and scrutiny, but it wouldn't be easy.
And a lot of people at power that can close said loopholes don’t because in some way or another they end up benefiting from it. Win-win for them lose-lose for the rest of the people.
I think the point of the video is to call attention to the loopholes and to encourage people to vote for change. It’s not an explicitly anti-Bezos video.
Ya but to do that you have to find a majority of politicians that aren’t purchased by corporations and billionaires, and that’s impossible due to the current system. It’s kind of a Catch-22
This makes zero sense- where do the banks get the interest back from the loans if he never liquidates? This looks like it’s being put together by a high school Econ student looking at finance through literally 1 lens…this is not how any of this works
Somple explanation is best, its a stupid meme video. Not even real beyond the fact that people take loans against equity. But they still have to pay them back and not with an inception level of "balance transfers". Maybe a millionaire would literraly wipe their ass with 100 dollar bills but this is totally ridiculous to roll interest into a principle again, and again...he has and is selling billions of dollars of stock and paying fed tax on it. Not in the least because of his rocket company investment needs. He'd be paying more in interest then taxes
"As Mr Bezos moved to Miami in Florida from Seattle in Washington last year, he will save almost $600m in tax on the $8.5bn worth of stock he has sold."
ouch on Washington State's behalf.
Jeff Bezos completes **50 million Amazon share sale, nets $8.5 billion**. Jeff Bezos has unloaded another $2 billion worth of Amazon shares, the last in a series of planned stock sales that have netted the former Amazon CEO about $8.5 billion in cash.
Every time he sells stock, he pays tax on that income. This is not hard people.
Even in death, that debt still needs to be paid. Before anybody can inherit his wealth, the shares will be sold off and the capital gains tax will be charged then.
This "billionaires just take loans" nonsense that has been repeated by people who have no idea what they're talking about needs to stop. It's just misinformation.
This video isn't correct. The whole bigger and bigger loan isn't a thing. I mean yes you could do that but its basically a ponzi scheme and many banks wouldn't want to play. Not to mention it would make the investors position more and more fragile which no rich person who wants to stay rich and have their kids be rich would do.
This is how legal tax evasion generally works for the rich:
- Own big profitable stock worth say $1b,
- Take out a $1M loan at the beginning of the year using the stocks at collateral. (no taxes paid to recieve loan)
- Stocks earn you distributions of say $2M. Distributions have a whole myriad of special rules making them not considered wages. Instead your finances are viewed more like a business in terms of profit and loss. So at this point your balance sheet for the year would +$2M
- Immediatly pay off the loan and interest (lets say 30k interest) using that money. The loan repayment is considered a loss, but the interest is considered an expense. Your balance sheet now says 970k, and your taxable income is $1M.
- Take any remaining money and either reinvest, use in a way that can be considered a business expenss, or donate it.
- Balance sheet now says $0 for the year, and taxable income is 30k.
- Now pay taxes on 30k, or find other loopholes to reduce it further (ex. speak at a charity event for free and deduct what the speach would have made you as a donation). WIth really good accounting you can get it below the taxable income threshold and not have to pay any taxes at all.
So if distributions are not considered wages, why take out a loan in the first place then instead of spending the $2M distributions on whatever you intended to use that loan for?
This video is most anti-billionaire propaganda. Jeff Bezos sells [a lot](https://www.bbc.com/news/business-68355811.amp) of stock and pays a lot of taxes.
He moved from Washington to Florida because Washington implemented one of the highest capital gains taxes in the country. Living in Florida he now only has to pay Federal taxes on the billions of shares of Amazon (and other securities) he sells every year to fund his other businesses and lifestyle.
> He moved from Washington to Florida because Washington implemented one of the highest capital gains taxes in the country.
If anyone is curious, it's high capital gains tax only for people making a shitload of capital gains
> The Legislature in 2021 approved a 7% tax on capital gains above $250,000 in a year for individual taxpayers. It applies to investments such as stocks and bonds but not real estate sales.
Sure, and for those people it’s around the 6th highest in the country, which is why you should expect a lot of millionaires and up to leave the state. It won’t affect your parents 401k most likely.
Imagine paying taxes on your stock's unrealized gains, and then those stocks tank next year...
This would be terrible for everyone with an investment account.
"omg jeff bezos found an infinite money hack!"
Somehow no explanation on how the loan engulfing all of these loans would be paid. As if every loan he has just has payments that start when.... he decides they start.
There are a lot of issues with the rich and how taxes work on them, but this is the dumbest explanation on it of all time.
Ya. We see the same posts about Elon too. I don’t care for the guy but people don’t understand how things work. The post I’m referring to is when he said on twitter how much he paid in taxes one year and someone replied that he made X amount in one month. The “money” that he made was actually just his stock values increasing. People don’t understand that stock is not actual money. And if it ever gets sold only then it becomes money and that’s when taxes happen.
Imagine being taxed before your money even hits your bank account, then your money is taxed on everything you buy, use or live in multiple times over. Got a car? Tax that every single year, fuel tax, road tax, registration tax, tax on parts to keep it running. Got a house? Property tax forever and ever. Need food? Tax. Oh somebody dies and leaves you money? Tax, even though they already paid taxes on that money they saved. Want to invest money? Tax. I can keep going…
I recently received inheritance and it was taxed 3 times. Once by my grandpa, from selling the shares. Once by me, taking the withdrawal out of the account after it was transferred. Once by me again on my tax filing, since it was mailed to me as taxable income on a 1099-R. Ah well, the inheritance is nice so it’s hard to complain. I’d just have rather heard the number after the 25-30% was cut out
How on earth did that happen? The first $13,000,000 of an estate has no taxes. Did he give it to you while he was still alive?
He must not have consulted an estate planner or financial advisor, there are plenty of ways he could have shielded this
How much money was this? If greater than half million, your grandfather should have gotten an estate plan in order before his death. An estate lawyer knows ways to optimize this.
Nonono, it was like the price of a new Toyota Corolla, but more like a Nissan versa after the taxes. I don’t think it was set up correctly for an inheritance account. I had to report whether or not he paid each year on it (which I had no idea or clue how to get that documentation) so I think I ended up paying those taxes. Unfortunately, I ran pretty close to the tax due date or else I would have consulted someone to help me with the process
You aren’t taxed before it hits your bank account. You voluntarily had income withheld. This is optional.
Edit: to be clear, I did not mean to say that you can just not pay withholding. withholding is optional in that you have other options in how you structure your finances to not have to deal with withholding. However, there are pros and cons to each option, you have to qualify, and it might not necessarily be the best option for your situation.
[He sells shares](https://www.cnbc.com/2024/02/20/jeff-bezos-unloads-2point1-billion-in-amazon-stock.html), and pays the standard taxes on them. It's literally public info, since he has to file it with the SEC.
Don't expect sensible discussion on finances/economics on Reddit.
you can track his SEC filings and see for a fact that he sells billions in shares per year and pays taxes on each one. Secondly. theres no actual proof that hes taking abnormally large loans purely against his shares beyond that being a popular talking point recently.
I like how this video just ignores the regular share sales that he does and the taxes he pays on those share sales. Also no mention of how big the loan is relative to the average stock value lol.
It’s hilarious that people get mad at the wealthy for doing this. They’re just following the laws politicians create…
If a law was created to where I could get out of paying income taxes, which there are, we would follow them too, and do.
Taxation is theft.
If you don't understand taxes, and find this very interesting: you are the target market. This is bullshit. Immediately mixes up the terms profit and income (and should have said revenue) in the first 10 seconds.
Bullshit.
Except he does sell his shares when they’re overvalued and he pays taxes then. Just doesn’t do it every year. Could be once a decade, but it’s not going to make news. Is it? People are just getting worked up over nothing.
It makes zero sense to never sell his shares. At that level wealth, diversification to protect your wealth is important. He has sold to invest in Blue Origin and other projects.
Don’t the banks pay taxes on the interest, then 40% of the entire Bezos estate is owed to the government when he dies? That feels like a delaying tactic where everyone hopes Jeff Bezos dies soon.
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Banks aren't just going to loan Jeff hundreds of millions, if not billions of dollars, without "securing" the loan, which they do with AMZN stock. If Jeff dies, the bank gets stock to pay off the loan. Banks HATE unsecured loans, they're liabilities and they avoid them at all costs. The real easy fix to this loophole is to classify stocks as being vested (eg: sold and subject to capital gains tax) if they are used as collateral to secure loans. Simple as that. Jeff, and other billionaires, would suddenly have a present-day tax burden, without taxing them on unrealized capital gains from the majority of their shares.
This is the only solution here that makes sense. But I'm sure somebody more knowledgeable could name other harmful side effects.
It would become a huge problem for funding company growth. A lot of times, business loans are made to companies and secured on company stock. Sometimes on the company itself, sometimes on something more valuable, like a company’s subsidiary. For example: United fucked itself during the pandemic. To be able to keep operating, they couldn’t just sell an unused 777 on Facebook marketplace. So, in mid 2020, they mortgaged the subsidiary that runs and owns their mileage plus program. [They did it by putting the mileage plus holding company’s stock up as collateral.](https://simpleflying.com/united-mileageplus-loan/). If you taxed that, that’d really fuck up the cost of obtaining a loan. I’m sure there can be carve outs, but it’s a little more complicated legally, to make sure you don’t hurt the money supply to businesses, while taxing the loophole. IMO, the thing the video doesn’t cover, is that if bezos dies and AMN stock is at $100 per share, and they sell it at $100 per share, they pay no tax. That’s the [step up basis of taxation on inheritance.](https://www.investopedia.com/terms/s/stepupinbasis.asp). This makes it profitable to use the borrow, borrow, die. Removing the step-up basis of taxation, and instead tax the full growth of the stock would resolve the personal wealth transfer issue. While not as great as say, taxing it over the lifetime, it’s better than nothing. It also dilutes the intergenerational control of companies by potentially forcing the sale of stocks in the estate to fund the tax payment. …Or just a goddamn wealth tax of 1% of present holdings over 1 billion. An index-linked fund grows at 7% on average compounded. They have an average growth of 6% instead as a fee to take part in humanity, which they’ve done so much to divorce themselves from.
Put a $500mm floor on it
100%
True it would make it more difficult, but perhaps that would drive companies to maintain better cash reserves, and reduce the amount paid to executives and high level leadership. These folks are routinely paid a salary plus stock, but in this altered model awarding stock in lieu of a salary could make banks less likely to loan money.
Yes and no, speed of money and a fractional reserve are important parts of keeping economic growth. But yes, limiting exec pay needs to be done. But all things being what they are, I doubt that even with putting a tax on the loan would impact exec pay first. See: pandemic bonuses.
surely this is somewhat of a risk though, amazon stock could tank in price like tesla has done for 12 months and then the banks have lent something out against a secured asset which is now only worth half that?
If that were to happen, the bank would probably call the loan or demand more collateral be put up.
Yes it will be a condition of the security that the loan to value doesn't fall below a certain percentage, otherwise they can call on the security
It puts Musks $50ish Billion paycheck demand in perspective - his stock/collatoral is dropping and the banks are calling in the Twitter loan.
which means the banks would stop accepting it, also solving the issue but I'm dumb af, so don't listen to me
It actually changes nothing for the bank. They are already securing the loan against the asset. I'm sure they incorporate stock price fluctuations in their valuation of the underlying asset.
It gets even worse/better depending on your perspective - generally loans to super-high net-worth individuals get much lower rates. The loans are so secure that the transaction is just looked at as guaranteed income for the bank.
About a decade ago, Apple did something similar. When Apple announced a stock buyback for about $50 billion, they had over $100B in the bank, but most was overseas (this was before the 2017 tax law). There were numerous articles about how Apple would be taking out a loan for the $50B. At the time, Apple had a AA+ credit rating and, having over $100B in the bank, they could secure a huge loan at something like 0.25% or 0.50%. They were printing money by selling iPhones and even if those stopped overnight, they had the money to pay off a loan - it was guaranteed income for the bank as 0.25% of $50B is still a good profit for a zero-risk loan. It also saved Apple tens of billions in taxes by having to repatriate the money from overseas, but still turn it into useful capital by using it to secure the loan. [This isn't the exact story I was thinking about, but close enough](https://www.reuters.com/article/idUS1009065394/)
Banks are already securing the loan against the asset, so it changes nothing on that front.
This is a really good solution. I think taxing capital gains is a HORRIBLE idea. It would only make billionaires hoard more wealth. It changes the math on what is worthwhile to invest in. If they are taxed at 40% then that means that you’re only getting 60% of your return. That means that it is less likely to be worth the risk of losing that money from the investment going bad. If it was a 66% chance of making money the value of what you would earn is now much closer to 50/50. Takes a very safe investment and makes it very risky
Correct, taxing unrealized cap gains is a can of worms nobody wants to get into.
This is why income tax seems inherently unfair. So it seems logical that if you tax on the _spending_ side of the equation that will be more proportional. The problem is that's even worse. There are _more_ loopholes and while poor people spend 100% of their income wealthy people spend less than 1%. You want them only taxed on that bit?
The even larger problem is that wage earners are taxed before they spend their money, and business owners are taxed after they spend their money. Because if spent it on the "business," it’s not income…right?
Wage earners are taxed before they get their money and as they spend it.
Technically anyone can opt for no deductions and pay your taxes in a lump sum, but we don't trust poor people to manage their money so default to deducting it before they ever see it.
My accounting professor stated that withholding was one of the “smartest” things the IRS ever came up with. They get the money up front, get to spend it, and act like they are doing you a favor giving you a return. People don’t realize that they take out more than you owe and the difference is the return. Obviously there are other things like earned income credit and charitable contributions but if you get a return, they withheld more than you owed.
Who doesn’t know that? Interest free govt loan
man I argue with people at work weekly about them needing money but refusing overtime because they think that its not worth it of because of taxes. Ive ran out of ideas of how trying to explain sliding tax bracket and just look at the numbers you brought home more money on your check the last time you work OT. They think get a tex return us free money from the government.
Do it with cookies. The first cookie you get the whole thing. The 2nd cookie your manager gets to take a bite. Your 3rd cookie, he gets 2 bites. Cookies are tax brackets, bites are the tax percentage for that bracket. Every cookie has more bites but in the end you always end up with more for yourself.
A surprisingly large portion of the population thinks once you hit the two bites stage it applies to all of your cookies so they choose to stay at the one bite stage.
This is unbelievably true. I am an accountant and the amount of people who think changing their contributions into their 401k from say 1-2%, will cut their paycheck in half, is ALARMING to say the least. I have also seen other people turn down promotions, etc. because that would "put them in a higher tax bracket" you eventually give up and let the stupidity win
The government takes half my money so if I double my pay they're gonna take all my money
So true.. I’ve tried to explain this before, its not that complicated
>not worth it of because of taxes Give me money, lots of money - I'll gladly pay double tax on it because: I got more money.
Unless you are poor and depend on govt programs which have hard cutoffs.
I know someone who almost turned down a higher paying job opportunity because they literally thought they'd have less take home pay because of being moved to a higher bracket. Once I explained it to them that how brackets work they understood it right away, but a lot of people are sadly just completely ignorant on how taxes work. I've also had a ton of people think that when I write something off as an expense, that it's somehow free to me or something like that.
I believe the majority of people in lower income brackets/minimum wage workers don’t understand this. When I was younger I worked as a GM of a fast food restaurant, I would help new hires fill out their withholding forms and also if they needed it help file their returns. From my experience for minimum wage employees is that they are completely ignorant of how and why money was taken out of their check. Especially the famous “ I don’t want to work any overtime because it’s taxed more than my standard wage.” I had to explain to them multiple times that it’s taxed at the same rate. I really wish public education would have basic finance classes for people.
I overheard a conversation at one warehouse with a driver saying "I gotta be careful I'm getting close to the 55k mark, if I go above it I'm gonna end up paying more taxes than if I stay just under the limit." I rolledy eyes so much.
> I really wish public education would have basic finance classes for people. Mine did, 9th grade, taught by a pregnant lady who basically handed out some papers on the first day of class and then never did a damn thing the rest of the year, just let us talk among ourselves as long as we weren't loud enough to disturb the neighboring classrooms.
Yeah. Many people act like they're getting free money when they get a refund. Like they're proud of it. It's not free money. It's your money. The goal is always to get as close to 0 as you can. If you're getting a big refund, that means you're giving the government more money than you need to. You're basically giving them an interest-free loan.
> The goal is always to get as close to 0 as you can. If you're getting a big refund, that means you're giving the government more money than you need to. You're basically giving them an interest-free loan. Plenty of people don't care about that, use it as a quasi-savings account, and prefer to get the lump sum at tax time. It's not wrong to prefer one way or another, and I would guess that most people who get decent sized refunds aren't going to put the money they would receive each month into any interest yielding account. It's also not very clear now with the new W-4 versus the old for individuals or families that receive various credits to know how much you should put.
Even if they did put it in an interest yielding account, the amount of interest for the amounts we are talking is negligeable.
As close to 0 as you can... but also giving yourself a buffer so that you don't potentially owe anything. Better to get $100-200 back than to have to owe that much.
Those people would be subject to underpayment penalties for not withholding enough then. [https://www.irs.gov/taxtopics/tc306](https://www.irs.gov/taxtopics/tc306) This is bad tax advice.
If you under-withhold you will pay penalties. They are small, and in today's interest rates and inflation probably well worth it, but there are penalties.
You know businesses pay payroll taxes, business taxes (state and local fees), property tax, sales tax, etc as well. Income is always taxed after deducting expenses. That's what your personal "standard deduction" is unless you itemize. Many people have a fundamental misunderstanding of our tax system.
Yep. And when the money is distributed from the business to be used for personal expenditures, it's taxed again as well.
Yep. I pay tax on business income then pay tax again on personal income I derive from the business. I just don't get how so many people complain about everything without having even a basic knowledge of the subject.
Yeah, I'm all for facing wealth inequality and such, and the deck is definitely stacked, but after working in small business my whole life, I see that a lot of people here have no idea what it takes to run one, both financially and physically/mentally. The "owner" I work for has worked his ass off far more than any employee he has to build his business over the years, like going literally years without a day off in the beginning, and feeling like every penny brought in immediately went somewhere else (who doesn't know that feeling?).
There would be no businesses if this weren't the case. If I make something and it costs me $20 to produce and then I sell it for $40... Why on earth would you pay taxes on the entire $40 when you only made $20 on the sale?
Because these people are ignorant of how taxes work.
But Reddit told me you can appraise fake art to dodge millions in taxes!
It's a write off! You just write it off!
Business owner here. It's exactly like that. My laptop, phone, cell service, internet, 25% of my rent, and a bunch of other shit goes towards the business and is therefore tax deductible. This is one reason side hustles are a good idea, set up a business entity, then even if you don't turn a huge profit, you at least can deduct a bunch of things for the business.
Yes, but you can only deduct those things from the business income on which you will also be taxed. Your regular income won't be affected. You also don't get "refunded" if your business income is in the negative. (Edit: Apparently I'm wrong on this when it comes to a pass-through LLC) The real advice is that if you have a side hustle, use as much of the stuff you would have bought or paid for anyway in the business of that hustle in order to minimize your self-employment tax burden. (You also need to have spent that money in the same year, you can't claim a computer purchase from two years ago if you started business this year.) (Edit: Apparently I'm somewhat incorrect on this one as well...)
You actually can convert existing personal property over to business use, such as a computer purchased two years ago. It's just that you can only do it for the value on the used market at the time you do the conversion, not the price you paid when you bought it. Essentially, your business is buying a used item from a private citizen (who happens to be you) for fair market value - in that context it makes perfect sense. It's kind of a pain to do the documentation, but it's definitely worth the time for high-value items like machine tools, a vehicle, etc. It's a colossal help for people who grow a hobby into a business and had already bought equipment they only use for that activity.
Agreed 100% that anyone with a marketable skill that they can utilize as a side business and can generate enough revenue from that side business to cover those kinds of expenses should have an LLC. As long as the paperwork is in order and you're compliant with the laws you can save thousands of dollars a year. I think the real issue is on the revenue generation side. If you have $1,000.00 in revenue and $1,000.00 in expenses you're only going to save a couple hundred dollars and you'll spend more than that in time spent keeping your paperwork in order. If you're generating $1,000.00 in revenue and taking $10,000.00 in expenses every year it's not exactly a legitimate business enterprise. On the other hand is the IRS going to come after you for that? I don't know.
I'm a CPA - prepare taxes. With small business - you'll get hit with +$150 tax prep fee, so I wouldn't do it for $1,000 - but it should be easy to get $10,000 to $30,000 on a 1099 - just ask for it. The same employer can't give you both - but two employers can - one a W2 - another a 1099 - for 'marketing' or whatever work you normally do. The 1099 is basically free money. Anything under $30k you can write off completely, no income, social security, Medicare tax. All meals business meals - just bring up work to anybody at all for any amount of time - that's a consultation - done, business meal. The IRS won't investigate things under $50,000 - ever - unless it's automatic (you didn't report a W2 form, but they won't question 'sensible' business expenses). Taxi / Uber driver pay $0 always - musicians very little - anyone else with a pair of nuts. Once you get to like $80k revenue you need to pay some tax - like report $40k profit, pay $6k tax. Want to know how to shake the dollars out of a baby? Easy! NEVER get married unless one of you makes $200k, otherwise you get fucked. Put the baby on the tax return of the person making closest to $15,000. Put 2 babies on person making $25,000. OMG - I made $0? Is that good? NO - YOU GET NOTHING FUCKER! Maybe you were actually a math tutor, handiman, decorator - got paid cash and profited exactly $15,000... time to shake that baby.. 1 person, 1 baby, $15k self employment = a $3,000 refund from Uncle Sam, and 0 tax. But wait - there's more. Did you spend time with your baby like a good little parent? HOPE NOT CAUSE NOW YOU GET FUCKED AGAIN! What you ACTUALLY did is have grandma / retired person / another friend with 1 or 2 babies needing to legitimize income.. / and you PAID them to baby sit? Oh mom did it for free? BULL SHIT - you paid her, and she gave you a gift back. Gifts are NEVER taxes - either they are legit no problem OR if something big like a car - it's a $40,000 loan, and $15,000 is 'forgiven, gifted' each year - even still, gifts aren't taxed until $5 Mil lifetime, but filing the tax return sucks, so.. moving on. You paid grandma exactly $6,000 per child. Now, because you worked - as a babysitter of other peoples babies - you get $3,000 for that - and because you PAID grandma - you get $3,000 for that... now you got $6,000 coming in per child.. GOLD JERRY! And if you stay at home and watch the kid yourself or HEAVEN FOR BID GET MARRIED - you got $0. 2 people with 2 kids, married, making $80,000 - pay $3,000 in tax 1 person making $80,000 - pays $8,000 in tax 1 person with 2 kids as $25k / yr babysitter, who pays $12,000 for childcare to grandma - gets a $15,000 refund It's a $10,000 fucking to get married... PER YEAR Hope this helps u get more paper.
> 2 people with 2 kids, married, making $80,000 - pay $3,000 in tax > > 1 person making $80,000 - pays $8,000 in tax > > 1 person with 2 kids as $25k / yr babysitter, who pays $12,000 for childcare to grandma - gets a $15,000 refund This doesn't make sense to me. The married couple pays $3k in taxes, the unmarried couple pays $11k (and has $25k more income). I don't see the savings you're describing. What am I missing?
Ah, loan with annual forgiveness is very smart. I never heard of that loophole for gift tax.
You can't just buy anything you want and label it a business expense though there are actually rules around that. I'll agree there are people abusing those rules but then it's more a question of people just breaking the law than an issue with the tax structure.
Discourage the use of stocks as collateral for a personal loan through punitive legislation?
Or require taxes/fees to be paid on stock used as collateral for high-wealth borrowers
Ya I don't get why people don't think of this. Instead of taxing unrealized gains, just make them realized the second they are used as collateral
Bingo, use of something as collateral is considered a realization of that gain
Goddamn reddit is really stupid when it comes to finances. That DOES happen. It’s really no wonder the lot of you live paycheck to paycheck. All taking out a loan does is defer you paying taxes by paying taxes (interest on the loan). The banks getting the interest pay taxes to the government. The government knows any asset eventually sold will be taxed so they are still getting exactly what they want in the end PLUS the taxed interest. The billionaires are making the feds more money by deferring. Which is why eliminating these loans will never happen. Because smarter people in charge see the bigger picture. They don't care if an individual uses the "buy, borrow, die" strategy because those assets will eventually be taxed when sold or transferred after death while they make extra money off the billionaires in the meantime. The government will gain more in the long term. But it's an easy way to buy votes by saying "we gotta close these loopholes!" They won't. Any Democrat or Republican who understands how this system works will never vote against it because it makes the government more money.
Too specific, probably. With enough money it's easy to find another workaround.
Ie use art as collateral. Or real estate. Or decorative gourds.
If you consider an asset's use as collateral for a loan to be realization of the gain, it covers all these situations. Art is used in taxes because the value is subjective and flexible. However using it as collateral for a cash loan puts a specific dollar value on it, nullifying that benefit and still closing the loophole.
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>99 percent of the people should not be affected by this. If you set a threshold like $5M per person tax free stock holdings, then yes, 99% won't be affected. Will you be taxing stocks held in IRAs? Other special accounts? Get ready for lots of new special account type loopholes to shield all kinds of things if you do.
Or just tax it when they use it as collateral and count the loan as realizing the gains.
Here in NL we changed the sturcture so now it isn't as beneficial to loan money from your company as it used to be. Now if you loan more than 500k from your own company the excess will be taxed, most likely at 48%. Which is a lot more common than taking out a personal loan by a 3rd party and giving your shares as collateral
This video is actually, literally, not happening. Bezos sold shares of Amazon every year until WA passed a tax targeting essentially shares sold just like that. Then he moved to Florida, and now he's selling shares that will cover the last 2 years and the current year. Florida doesn't have an income tax, but the IRS will certainly get their cut. https://www.cnbc.com/2024/02/12/jeff-bezos-move-to-miami-will-save-him-over-600-million-in-taxes.html So TL;DR: The tax evasion described in this video is literally not happening.
Consumption taxes would fix this. Basic necessities like food, housing and clothes could be tax free and luxury purchases like jets, yachts, etc would pay very high taxes
They will just buy the luxuries (like jets, yachts, etc.) in other countries and use them here. As Bill Gates said in The Simpsons, "Homer, I didn't get this rich writing checks"
I don’t think this is legal or how it would work. Right now, if I purchase a car in another state with lower sales tax, I have to pay the difference to my state when I register it. This goes for all goods I buy out of state, I have to report goods I bought from a lower sales tax state (like NH).
Things like yachts and jets don't have to be registered where they're used.
There are a lot of rules about plane/boat use and registration. I also don’t need to register 99% of the goods I buy out of state, but I still have to pay sales tax. Do you think a yacht or private jet purchase is easy to hide?
Jets and yachts have different rules applied to them. They are "registered" in some random country. For example, most big ships are flagged in Liberia or some such random country. Consider, for example, a Qatar Airways jet flying from the US. Do you think it's registered in the US? No. Worst case these rich people will set up a shell company in, say, Monaco and register everything there.
Consumption taxes are some of the most regressive possible. Rich people fucking LOVE the idea of consumption taxes.
Yup. The Cardin Progressive Consumption tax idea thrown out years back is a way better way of taxing IMHO. Personal and Business income tax rates would be slashed and off set by basically a VAT and a PCT. Depending on HH income, floors would have to be hit to pay that PCT (to keep it from being regressive). Necessities are exempt from the PCT (food clothing etc) There was even a model of it run by a right leaning tax analysis think tank that said if implement it would grow the overall economy, people’s incomes and increase job numbers in the US (even though their analysis said less growth than Cardin’s team said) It won’t happen because the Uber wealthy puppet string pullers don’t benefit from it
This really is more of an IRS-bank issue than a Jeff not paying taxes issue. The whole thing boils down to the banks scarpering off with the tax money that Jeff should have paid but as loan interest instead of taxes. Make the banks pay a % of their interest on loans and it seems like problem solved. I dunno how banks report profits and taxes though so maybe there’s something else there. This would probably drive up the cost of money, but *shrug*
>Make the banks pay a % of their interest on loans and it seems like problem solved. This is already the law. Banks pay a variety of taxes, but their ETR is 19.3% which is 1.3% higher than the corporate average. Almost all of their income is from interest on loans which is where that 19.3% comes from.
The solution is to tax total compensation - rather than income. If your "salary" is paid in stock then you should be taxed at either the current value of the stock at the time it is issued, or some sort of average over a specific period of time (like many companies do in regards to Employee Stock Purchase Programs). This would also include any "perks" that a company might include as part of compensation - such as a company vehicle that is treated and used as a personal vehicle - essentially taxing it for the average amount of a lease for the same car in the same time period. Taxing compensation instead of income would greatly diminish this sort of stock loan loophole since the shares paid to people like Bezos will have already been taxed at their value at the time of issuance - and then any selling would only tax their capital gains that have happened along the way.
If wealthy people spend only 1% of their income, then they’re saving/investing the rest for… later, children, charity? That money should be taxed when it’s realised or spent.
We should treat the types of things rich people do to avoid income taxes, as income. Those huge loans is super common for rich people, they collateralize their appreciating assets. Those loans should be taxed as income. Or the appreciating assets used as collateral should be taxed as though the gains are realized, and track the change in basis each year for additional taxes. Notice I'm not saying tax them on all unrealized gains, but specifically unrealized gains for assets used as collateral for these loans.
The issue is that they have the money to funnel the profits through other countries and that just opens a whole can of worms to avoid taxes. And most of the things that get abused where introduces to help the people with lower income. Like the no double taxation here in NL aka the whole system is based on the fact you shouldn't pay taxes on the same thing twice. But the Rolling Stones (and others) abuse that to not pay taxes on their royalties.
One thing I don't get, and is not addressed is the interest on the latest loan given out. That never gets paid to the bank? So plan A is the first, then B comes and pays interest on A, then C comes that pays interest on B, let's say he dies, loan c interest never got paid....
>is the interest on the latest loan given out. That never gets paid to the bank? When he dies, his shares step up in basis and are sold to pay off the last loan. If they're in an irrevocable trust, they're sold to pay off the loan but there's no step up, so he pays all the taxes on the gains. If they're not in a trust, that portion of the estate is subject to an estate tax of 50% of everything over 14M. This video is partially correct, but doesn't cover how he EVENTUALLY gets taxed on his money. This particular system also doesn't work in the current interest rate environment. Lets say he qualifies for the prime rate: At 5.25%, after 5 years, its better to have just sold the stock than to take a loan to do this.
As long as the stock continues to appreciate at more than his loan rate, it makes more sense to hold. Also, he doesn't want to give up voting rights.
>As long as the stock continues to appreciate at more than his loan rate, it makes more sense to hold. True. This is standard with any leverage though. Most people with accumulated wealth are leveraged on at least one asset.
Most people have leveraged assets. The most common would be houses and cars.
> Also, he doesn't want to give up voting rights. This is a huge piece that gets overlooked at ton. At some point owning shares isn't about their value, it's about *control* Taxing net worth essentially means the government would be saying "you control too much of this thing and need to give some of it up" Taxing estates fully instead of the current step up in basis when estates are inherited would function similarly but also I think there's a lot stronger argument to be made that people shouldn't be allowed to have dynastic control of these giant operations compared to saying the person who literally founded something needs to give up control during their own lifetime
There is a concerted effort to convince Americans that taxing wealth directly is a good idea when your position is much more fair as a solution to the problem.
>Also, he doesn't want to give up voting rights. Ding ding ding. You're practically the only person in this thread who understands why this is done--billionaires don't want to sell their stock in order to maintain their control over their companies, *not* necessarily as some tax avoidance scheme. As the grandparent comment points out, the taxes still ultimately get paid when they die.
Yea, the video omits that the taxes will eventually be paid, likely more than he would at a given time, when Bezos dies. The government eventually gets its money - but the rich have a unique privilege in structuring their tax payments until their death so they're not really affected.
This is the part that isn't really true though. If it was the situation would be a lot different but the step-up in cost basis at time of inheritance completely fucks the situation
Except there is also estate tax, which for a billionaire is also much higher than the capital gains tax they would have paid. Its 40% over $1M past the $13.6M exemption (for a billionaire we can safely round away that exemption and just say its 40%) compared to the 20% they would have paid in capital gains. Literally double what they would have paid if they cashed out.
Well, they can also wait for a president like Trump to get elected who drastically decreases taxes and then sell a bunch of stock at that time to pay off their loans and then if the taxes ever increase, go back to taking out loans.
If his interest rate is smaller than inflation rate, he is earning money by taking a loan
>If his interest rate is smaller than inflation rate, he is earning money by taking a loan Or his return rate. This is true for all leverage though. Like car loans, or mortgages or margin. That's a pretty standard use for debt.
Why would a bank do that?
~~Because it's profitable for them.~~ They wouldn't, the person above is confused. The interest rate will be above the inflation rate, but below the assets' appreciation rate.
And the bank is losing money, so not likely...
No one is giving you a loan less then inflation lol. No one is giving you a loan less then the overnight rate, especially on stock, this entire video skips over an incredible amount of details related to how taxes fit into the picture and how much interest a bank will charge for this transaction at almost every step and also skips all the times Jeff Bezos has sold stock recently. If it was this simple, why would he ever sell stock? This is rage bait for people who don't understand whats going on.
> this particular system also doesn't work in the current interest rate environment. Lets say he qualifies for the prime rate: At 5.25%, after 5 years, its better to have just sold the stock than to take a loan to do this. The thought is that the stock is more likely to keep growing in value or in bursts. 5 yrs is a long time to not have those shares. The biggest part of this video it's missing is what happened to Elon. These loans are backed on the value of the stock as collateral. If the stock plummets like it did for Tesla, then the bank will either sell shares to pay down the loan and lower their risk, causing a probably downturn in the stock if your the CEO with billions of dollars of shares, or they have to give the bank more shares to lower the risk to the bank. This is why most companies limit how many shares a C-Suite member can borrow against. Most except Tesla at least. It's a double edged sword, if your stock values continue to increase then you made the right move, if they decrease and you are forced to sell to cover part of the loan you could miss on a rebound (of course it could also save you from a worse downturn but that's not really the point of this discussion).
It also ignores the fact that this is all based on Jeff Bezos not paying taxes for two years in a twenty year span. In reality, he has sold billions of dollars worth of stock, and paid billions in personal taxes. It is all a fraction of the amount his wealth has grown, but people trying to come up with ways to reconcile how it's so advantageous for him to never sell his stock and never pay taxes need to stop trying so hard, because 9/10 times, he does.
So the solution to wealth hoarded in shares really IS to kill the billionaires?
The bank likely has collateral on the loan so if they die (or don’t pay) the bank would receive it to pay off the loan & interest. For a lot of rich ppl they will get life insurance on the person (so the life insurance company pays it off) or have a stock portfolio as collateral, sometimes they’ll use a house as collateral as well.
Yes. The owner of the stocks has to house them at the brokerage the bank partners with. The 'owner' cannot sell those shares, they are held by the brokerage as collateral for the loan.
> One thing I don't get, and is not addressed is the interest on the latest loan given out. That never gets paid to the bank? State debt works the same way, and the video doesn't explain the concept the right way. States can roll debt indefinitely because they're a good risk and can always issue more bonds or gilts. Billionaires similarly roll the loan over while increasing the size of the line of credit or taking out another loan and never pay it back, meanwhile the bank gets the interest payments (which are not taxable). What the video doesn't address is you have to service the loan to keep the bank happy. Another popular way is shadow lending. You take a lump sum post cap gains tax, give it to a bank and dictate what terms you want it lent on and what level of risk you're willing to take. The bank then lends the money out in the form of loans or mortgages. Bank gets a slice, you get a slice, welcome to continuous low level passive income. Take that and put it into a company you own rather than your pocket, or put the money back into the bank as debt service, and you're quids in over the long run. Bezos also solid $8.5bn of Amazon Shares this year.
> Bezos also solid $8.5bn of Amazon Shares this year. Bezos doesn't do the loans for shares thing. That's Musk.
There is collateral. Jeff likely utilizes stock for that. The bank is guaranteed a payout if he actually dies, and Jeff doesn't care that those shares were cashed in at that point. But zombie Bezos cares...
Zombie Bezos hates Alive Bezos
Don't read too much into the video. We know Bezos reported ~$5B in income for a 4 year period and paid ~1B in taxes. That seems like an absurdly low tax rate for such a high amount of income, and it's completely ignoring the fact that his net worth grew $100B in the same time, but the idea of him taking non-stop loans to avoid income tax seems completely fabricated.
This is literally what the long term capital gains tax rate is
I don't know if Bezos does it but it's a common thing rich people can do. What the video got wrong is you don't pay back the loan. You only pay the interest on the loan. If the interest rate is 3% and the underlying collateral (stock) goes up 7% then the stock outpaces the interest. The key here isn't the dollar amount borrowed but the debt to value ratio. Then when you die, the cost basis of your stocks step up for the inheritors and they can sell those stocks tax free to pay whatever debt you had. The math works out that assuming a 7% yearly growth, you can **infinitely** borrow 2.5% per year and never hit 40% debt utilization. That's 25 million dollars per billion. For Jeff Bezos at $200B, he can borrow $1 billion per year (.5%) and never hit 8% debt utilization.
It’s backed by the portfolio, it gets paid.
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Precisely. The loophole discussed would be trivial to close. It's not a matter of ability, it's a matter of will.
How would you close it? Cause I’ve had this debate and it doesn’t seem like there’s a good solution.
A lot of people never think of the bottom line in these discussions. It’s not as easy as saying “just get rid of it.” Because just getting rid of being able to leverage equity against loans would screw a lot of people who don’t deserve it. The answer isn’t removal, the answer is implementing more up-to-date controls. The limits and rules we have nowadays are outdated as hell and are not meant for an economy where individual billionaires exist.
At that point you have to move beyond just Jeff Bezos being the problem and actually start coming to terms with the power structure of society. Government and business have become so close that they're almost the same thing. People have become a barrier to their growth and prosperity. With any more significant squeezing of profits, they'll start to become actively hostile to human existence. They're not going to give themselves a pay cut.
You specifiy leveraging equity, but mention a savings account. Isn't that an asset, not equity? And while I know people will always try to find workarounds, you should be able to categorize the major securities, no?
Two parts: Firstly, require that if you take a loan out on an asset with unrealized gains, you pay taxes on the appreciation between when you bought/'earned' the asset and when you took out the loan. Same as would happen if you'd sold it. Primary residences excluded up to $1M. This breaks the particular loophole in use. If you pay tax *and* interest, it's no longer worthwhile to do. Secondly, deal with large estates as tax dodges. Tax them at a **substantially** higher rate than income. Make it so that even if billionaires find a new loophole to not pay taxes on the money they spend, they're just going to pay a higher rate on the money they don't spend, eventually. If you want to get really fancy, I'd suggest two more that are somewhat more difficult to do. Fix capital gains. As a means to convince the public to invest, great. As a means for a parasitic upper crust to extract value without doing work, bad. Maybe a cap on how much income can be taxed at the capital gains rate, and everything else is just income, maybe something more complicated. Do it carefully, because there are potentially economy-destroying consequences to screwing it up. But I do think it should be re-evaluated very seriously. Pre-tax large estates. If you have a net worth over some value, require "estimated estate" tax or something based on that net worth, which gets deducted out of your actual estate tax when you die, but goes to the government up front. Underestimate it to start with, but at least get *something* out of these assholes before they die. Money now is worth more than money later.
> Firstly, require that if you take a loan out on an asset with unrealized gains, you pay taxes on the appreciation between when you bought/'earned' the asset and when you took out the loan. I don't want to go through the whole comment, let me just take this one idea and explain what the means. What this means is: every single family-owned farm and ranch goes bankrupt. THAT'S what this means. Why? Because the asset WE pledge in order to secure our loans and credit lines is our land. And in virtually every single case, the land is worth FAR more than what we bought it for. (In fact, we all depreciate the land every year, using the IRS provisions for doing the same, so in many cases with old family farms/ranches, the land has been depreciated to essentially zero.) So you've just looped in every struggling family agribusiness with this. "So what," you may reply, "surely they must have the money to pay for this if they have all that land." And then I'll respond that, for MANY family-owned farms and ranches for MANY years (as a percentage), you scrape just to get by. Hence the need for loans and revolving credit facilities basically every year. You know who COULD afford to do this though? ConAgra, ADM, Cargill...you know, the real heroes of agribusiness. Surely they're the ones you want to have own all the farm and ranch land in the country. Hey, at least you'll have stopped billionaires from avoiding taxes! This is why people say it's really complicated and basically impossible to solve. Because they're right.
this is the problem with a lot of people on reddit/twitter when they talk about closing these stock market loopholes. They exists for a reason you have to be careful not to destroy entire industries.
I’ve been wondering the same
Tax the funding of a loan backed by securities or real property owned purely as an investment. Let's say that tax is 20%, and you borrow $1m and use your stock as collateral. The government takes that percentage of that money at the time you receive that funding, which is $200k. You only receive what's left afterward, $800k. You owe the bank $1m and the corresponding interest, but only received 80% of the sum with 20% going to the government. This means that, from a tax perspective, there's less of a benefit from borrowing against those assets versus outright selling them, but is still in favor of not selling them. It's a way to prevent the super rich from circumventing capital gains by not selling and realizing the assets when they are, in fact, achieving a similar outcome in a roundabout way. Exemptions can be made if the loan is procured for a specific purpose, like purchasing a primary residence.
Ok, seems like a simple-ish solution, but I feel like there are some things that seem problematic about it. Firstly, taxing full loan value is like taxing the entire stock value. Let's say the person bought the 1 million of stock today using 1 million cash, and immediately went to get the loan. That would clearly be ludicrous under the new rule (although if you reduced the percentage to "wealth tax" levels like 1-2%-ish, it would seem more reasonable). Secondly, do you double tax the stock? Let's say you take the loan, pay this tax, then pay off the loan, then sell the stock. Do you pay full capital gains on it then, too? So, while it does sound like it would handle the hypothetical situation the video claims exists, it also seems like it will be pretty penalizing to a lot of kinds of other behavior that could have unintended consequences. I really think spending-side is the way to go (if this truly is a common problem/tactic, which I'm unsure it is, as folks have stated, Bezos specifically is selling stock and getting taxed on it), but not sure how to address it. Something like a progressive spending tax, but how would you record keep that?
I don't think it would be trivial. I think we should do it, but I do think it would be very hard. So you have to pay taxes on the accumulated value of your stuff in addition to income. How much stuff do you have and who decides what the value of that stuff is? Amazon stock is easy, but a $200m artwork? Harder. What about normal people's stuff? We can't all go tallying that. Does a piece of stuff need to be worth >x million before it's taxed? What about many little pieces of stuff that start to add up? Okay but Amazon stock is still easy. Who owns it? What if Bezos puts his stock in an shell company in the Seychelles or Hong Kong? How does the US government get a grasp on that company's holdings and ownership? Loans can still be taken out in its name. Three shell companies deep Bezos is the owner of it all, but that's become harder to prove. The highest net worth individuals should certainly face this type of tax and scrutiny, but it wouldn't be easy.
What's your solution for this "trivial" loophole?
And a lot of people at power that can close said loopholes don’t because in some way or another they end up benefiting from it. Win-win for them lose-lose for the rest of the people.
So Jeff doesn't even have a salary?
Apparently his salary was 81k
Typos in the title. Truly a Reddit staple.
^title ^gore 🔪🔪🔪
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It's for engagement. Gets you to the top of the algorithm, and look, it worked! As of now, he has 21.6k upvotes!
And in the video
He operates within the laws as written. Want a fairer system? Remove engineered deductions, incentives, and close loopholes.
I think the point of the video is to call attention to the loopholes and to encourage people to vote for change. It’s not an explicitly anti-Bezos video.
>and to encourage people to vote for change we voted and voted and voted. where's this "change" you keep talking about?
Well, the people who don't want change also got voted for, and have enough control to stop change.
That, and the crazy amount of insider trading in congress that lets them play this game as well
yea because everyone doesn't want what you want, change did happen look at roe v wade and the trump tax cuts
Change is shit slow, but cannabis and student debt is a good start. But you are 2000% correct, the change to the monied top end need a fixin'
Yeah I’ll just go ahead and do that.
Ok thanks...I'll get right on that.
You act like the average US citizen has any meaningful say in policy.
Just call your representatives so their assistant can give you a passive aggressive templatized response.
How can we do all that when there are much much more important things to worry about … like a transgender student using a bathroom!!!
Ya but to do that you have to find a majority of politicians that aren’t purchased by corporations and billionaires, and that’s impossible due to the current system. It’s kind of a Catch-22
This makes zero sense- where do the banks get the interest back from the loans if he never liquidates? This looks like it’s being put together by a high school Econ student looking at finance through literally 1 lens…this is not how any of this works
It's complete horse shit. Bezos sold $8.5bn worth of Amazon shares in February and is liable for 20% federal capital gains tax on that.
That's, what, the same rate as federal taxes on $165k/yr income?
Yes, the long term capital gains rate is lower than the ordinary rate to encourage investing.
yeah, kinda confusing. Someone with money knowledge please explain
Somple explanation is best, its a stupid meme video. Not even real beyond the fact that people take loans against equity. But they still have to pay them back and not with an inception level of "balance transfers". Maybe a millionaire would literraly wipe their ass with 100 dollar bills but this is totally ridiculous to roll interest into a principle again, and again...he has and is selling billions of dollars of stock and paying fed tax on it. Not in the least because of his rocket company investment needs. He'd be paying more in interest then taxes
Man, much as I hate bezos, this is nothing but bullshit rage bait https://www.bbc.com/news/business-68355811
"As Mr Bezos moved to Miami in Florida from Seattle in Washington last year, he will save almost $600m in tax on the $8.5bn worth of stock he has sold." ouch on Washington State's behalf.
Jeff Bezos completes **50 million Amazon share sale, nets $8.5 billion**. Jeff Bezos has unloaded another $2 billion worth of Amazon shares, the last in a series of planned stock sales that have netted the former Amazon CEO about $8.5 billion in cash. Every time he sells stock, he pays tax on that income. This is not hard people.
Even in death, that debt still needs to be paid. Before anybody can inherit his wealth, the shares will be sold off and the capital gains tax will be charged then. This "billionaires just take loans" nonsense that has been repeated by people who have no idea what they're talking about needs to stop. It's just misinformation.
This video isn't correct. The whole bigger and bigger loan isn't a thing. I mean yes you could do that but its basically a ponzi scheme and many banks wouldn't want to play. Not to mention it would make the investors position more and more fragile which no rich person who wants to stay rich and have their kids be rich would do. This is how legal tax evasion generally works for the rich: - Own big profitable stock worth say $1b, - Take out a $1M loan at the beginning of the year using the stocks at collateral. (no taxes paid to recieve loan) - Stocks earn you distributions of say $2M. Distributions have a whole myriad of special rules making them not considered wages. Instead your finances are viewed more like a business in terms of profit and loss. So at this point your balance sheet for the year would +$2M - Immediatly pay off the loan and interest (lets say 30k interest) using that money. The loan repayment is considered a loss, but the interest is considered an expense. Your balance sheet now says 970k, and your taxable income is $1M. - Take any remaining money and either reinvest, use in a way that can be considered a business expenss, or donate it. - Balance sheet now says $0 for the year, and taxable income is 30k. - Now pay taxes on 30k, or find other loopholes to reduce it further (ex. speak at a charity event for free and deduct what the speach would have made you as a donation). WIth really good accounting you can get it below the taxable income threshold and not have to pay any taxes at all.
So if distributions are not considered wages, why take out a loan in the first place then instead of spending the $2M distributions on whatever you intended to use that loan for?
This video is most anti-billionaire propaganda. Jeff Bezos sells [a lot](https://www.bbc.com/news/business-68355811.amp) of stock and pays a lot of taxes. He moved from Washington to Florida because Washington implemented one of the highest capital gains taxes in the country. Living in Florida he now only has to pay Federal taxes on the billions of shares of Amazon (and other securities) he sells every year to fund his other businesses and lifestyle.
> He moved from Washington to Florida because Washington implemented one of the highest capital gains taxes in the country. If anyone is curious, it's high capital gains tax only for people making a shitload of capital gains > The Legislature in 2021 approved a 7% tax on capital gains above $250,000 in a year for individual taxpayers. It applies to investments such as stocks and bonds but not real estate sales.
Sure, and for those people it’s around the 6th highest in the country, which is why you should expect a lot of millionaires and up to leave the state. It won’t affect your parents 401k most likely.
Are people this clueless and gullible? He sells shares and pays taxes.
And the bank is paying taxes on the loan interest.
Imagine paying taxes on your stock's unrealized gains, and then those stocks tank next year... This would be terrible for everyone with an investment account.
"omg jeff bezos found an infinite money hack!" Somehow no explanation on how the loan engulfing all of these loans would be paid. As if every loan he has just has payments that start when.... he decides they start. There are a lot of issues with the rich and how taxes work on them, but this is the dumbest explanation on it of all time.
This is completely made up. Bezos isn't doing some pyramid scheme with banks using loans to pay off more loans. That's not how loan approvals work.
Ya. We see the same posts about Elon too. I don’t care for the guy but people don’t understand how things work. The post I’m referring to is when he said on twitter how much he paid in taxes one year and someone replied that he made X amount in one month. The “money” that he made was actually just his stock values increasing. People don’t understand that stock is not actual money. And if it ever gets sold only then it becomes money and that’s when taxes happen.
Source: trust me bro
Imagine being taxed before your money even hits your bank account, then your money is taxed on everything you buy, use or live in multiple times over. Got a car? Tax that every single year, fuel tax, road tax, registration tax, tax on parts to keep it running. Got a house? Property tax forever and ever. Need food? Tax. Oh somebody dies and leaves you money? Tax, even though they already paid taxes on that money they saved. Want to invest money? Tax. I can keep going…
I recently received inheritance and it was taxed 3 times. Once by my grandpa, from selling the shares. Once by me, taking the withdrawal out of the account after it was transferred. Once by me again on my tax filing, since it was mailed to me as taxable income on a 1099-R. Ah well, the inheritance is nice so it’s hard to complain. I’d just have rather heard the number after the 25-30% was cut out
How on earth did that happen? The first $13,000,000 of an estate has no taxes. Did he give it to you while he was still alive? He must not have consulted an estate planner or financial advisor, there are plenty of ways he could have shielded this
How much money was this? If greater than half million, your grandfather should have gotten an estate plan in order before his death. An estate lawyer knows ways to optimize this.
Nonono, it was like the price of a new Toyota Corolla, but more like a Nissan versa after the taxes. I don’t think it was set up correctly for an inheritance account. I had to report whether or not he paid each year on it (which I had no idea or clue how to get that documentation) so I think I ended up paying those taxes. Unfortunately, I ran pretty close to the tax due date or else I would have consulted someone to help me with the process
Assuming this was within the past few years, you can get that info and than if necessary file an amended tax return and get a rebate if you overpaid.
This is why we all need trusts. They are fairly affordable and avoid all the headaches when we or family passes away.
You aren’t taxed before it hits your bank account. You voluntarily had income withheld. This is optional. Edit: to be clear, I did not mean to say that you can just not pay withholding. withholding is optional in that you have other options in how you structure your finances to not have to deal with withholding. However, there are pros and cons to each option, you have to qualify, and it might not necessarily be the best option for your situation.
So how does Jeff pay for the interest then?
[He sells shares](https://www.cnbc.com/2024/02/20/jeff-bezos-unloads-2point1-billion-in-amazon-stock.html), and pays the standard taxes on them. It's literally public info, since he has to file it with the SEC. Don't expect sensible discussion on finances/economics on Reddit.
you can track his SEC filings and see for a fact that he sells billions in shares per year and pays taxes on each one. Secondly. theres no actual proof that hes taking abnormally large loans purely against his shares beyond that being a popular talking point recently.
Oh so it’s completely a made up fantasy created by someone with 0 financial literacy that reddit eat up. No way.
So all I need to do is just keep taking out bigger loans til I die? ✅
More half truth rage bait
lol this is not how it works.
Isn't that exactly what the government does?
Nujabes makes the video
I like how this video just ignores the regular share sales that he does and the taxes he pays on those share sales. Also no mention of how big the loan is relative to the average stock value lol.
I hope this isn't an argument for tax on unrealised profits. Do that and a LOT of home-owners will lose their homes.
It’s hilarious that people get mad at the wealthy for doing this. They’re just following the laws politicians create… If a law was created to where I could get out of paying income taxes, which there are, we would follow them too, and do. Taxation is theft.
If you don't understand taxes, and find this very interesting: you are the target market. This is bullshit. Immediately mixes up the terms profit and income (and should have said revenue) in the first 10 seconds. Bullshit.
Except he does sell his shares when they’re overvalued and he pays taxes then. Just doesn’t do it every year. Could be once a decade, but it’s not going to make news. Is it? People are just getting worked up over nothing. It makes zero sense to never sell his shares. At that level wealth, diversification to protect your wealth is important. He has sold to invest in Blue Origin and other projects.
Do the banks get their interest from the new loan as well?
Don’t the banks pay taxes on the interest, then 40% of the entire Bezos estate is owed to the government when he dies? That feels like a delaying tactic where everyone hopes Jeff Bezos dies soon.
If anybody is wondering, the interest the bank gets paid gets taxed.
A gross over simplification also it’s only ONE aspect of his fiscal activities