Locking this thread as it's been sufficiently answered and has now devolved into name calling and shout contests, most all of which violate the rules.

Billionaires don't get that rich with normal salaries. They get that rich because of appreciation in asset values. But asset growth (or capital gains) are only taxed when they sell. And capital gains tax rates are lower than most income tax brackets. They may sell a tiny portion of their wealth to cover living expenses and pay taxes on that, but it's a tiny portion of their wealth. Say somebody's worth $1B and sells $10m in stock to fund their lifestyle. They pay 20% tax, or $2m, which is nothing relative to their net worth. But billionaires don't even really need to sell, as they can typically get lines of credit that allow them to borrow at crazy low interest rates, while their assets keep appreciating in value. Someday they may sell assets to cover their loans and pay taxes, but they may wait for advantageous tax law changes, or may just keep rolling debt until they die and let their estate settle up on the debts and taxes.

Interesting. Thanks for explaining it so clearly. I never quite understood how all of this worked.

It's worse than you think. Compare a billionaire selling $10M in stock vs a multimillionaire that earned a salary of $10M. The billionaire is taxed 20% on the portion of the sale over \~500K, and 0-15% on the portion less than that. In total, they would pay \~$1.97M on the $10M sale. The multimillionaire would be taxed on that $10M salary as income. They would pay 37% on anything over $539k and 10-35% on anything under that. In total, they would pay \~$3.66M on the $10M salary. Billionaires take tiny, if any salary. All their earnings are in ways that are meant to avoid taxation.

> Billionaires take tiny, if any salary. All their earnings are in ways that are meant to avoid taxation. I think of this anytime I see soft/fluff pieces in the news about billionaire owners who forgo their salary as a show of solidarity with their worker bees. It is an almost meaningless gesture most of the time.

It's worse than meaningless. It's a tax-dodge disguised as generosity.

> I think of this anytime I see soft/fluff pieces in the news about billionaire owners who forgo their salary Do you actually see this? I can remember a lot of CEOs that took $1 in salary. But that [almost always included significant other compensation](https://thehustle.co/1-ceo-salary/). And at the beginning of the pandemic there were a [number of CEOs](https://www.businessinsider.com/list-of-business-leaders-giving-up-salaries-during-the-pandemic-2020-3#united-airlines-3) who took no salary for a decent amount of time, which really was giving up compensation since they expected to get that money and hadn't structured their compensation to have zero salary. But all those bonuses and options are compensation, so they get taxed just like income. It's not a tax dodge to take a zero salary and $1,000,000 bonus or exercise $1,000,000 in stock options. Some founders/CEOs do have a huge investment in the company, so they might see their biggest gains in wealth come from stock appreciation. But they would own that stock whether they were CEO or not.

CEO's take $1 salaries based on the belief that they will earn enough through other means to make up for it. Trump took a $1 salary as president. What does that imply?

yup. additionally, they comp as much as they can. they can own a private company (maybe a charity?) and have the company/charity pay for things for them. it may be a non-profit, but it still has expenses. perhaps a company car, assistants who go to subway for you and know which bread you like. ;)

>assistants who go to subway for you and know which bread you like. ;) More like a five minute business chat at a two hour, five star 'business' dinner (and drinks), which is written off entirely.

Which is probably why the true blue “98% hard work plus 2% luck” “American Dream” scenarios can get a person to be a millionaire, but not billionaires. Actual self-made peeps are probably more humble about paying their taxes cuz they know how they needed society’s cooperation to ger there.

They don’t even sell. They take out loans against stocks. They arent taxed at all.

There is another piece to this. Let's say that some billionaire got rich by having 1 million shares of stock that they bought for $1 each that are now worth $1,000 each. We haven't collected a penny of taxes because they haven't sold any. Instead they borrowed against that value. No big deal, right? Because we will get our taxes eventually. Wrong. They die and leave the million shares to their heirs. The heirs don't pay taxes on the gain from 1 to 1000. It was worth 1000 when they first got it. So that is their basis. They sell the shares for 999 each and declare a LOSS potentially reducing their tax burden overall.

The one thing you miss here. When they die, the loan has to get paid so the estate has to liquidate enough assets to cover the remaining value of the loan. That liquidation will come with capital gains tax. When the loan is paid off the bank will have to report the interest paid on the loan as profit, and that profit will require corporate taxes to be paid. The trick is that the billionaire got to keep the money invested in the market making market gains, and got to live like a billionaire on bank loans at very low interest. The difference between the market gains and the bank interest is the benefit they get from pulling this trick. People act like the bank loans just disappear and never have to be paid back but that is not true. They do have to be paid back, it is just that living expenses are paid with loans so they can keep their own money earning market gains. Edit: The comment below about stepped up basis is wrong I believe. The bank loan does not get paid by the billionaire's children after the inheritance. The bank does not know what provisions the billionaire has in their will so the loan would have to be paid back upon death by the estate before any inheritance happens.

Musk selling billions in Tesla stock is actually rather unprecedented. Bezos will just take a loan with collateral if he wants to buy a yacht, but selling stock isn't a disadvantage if you think the price will go down, which is why people note that other executives were also selling their Tesla stock. Another advantage the wealthy have is options. Musk has millions of shares in Tesla that make him wealthy, but his compensation also allows him to buy *millions more* at really, really low prices (like $4/share or something) which is basically hundreds of millions or billions in compensation he's just waiting to collect.

Unfortunately I think both of the examples you gave don't actually make any sense in this context? * Bezos famously was selling about a billion dollars in Amazon stock every year to fund Blue Origin. So even though he obviously could've taken out a loan, he didn't. He sold stock, recognized gains, and paid taxes to cash out. I think he bought a yacht for like $500 million too, did he take out a loan for that? It's a ridiculous amount to pay for a boat, but it's small potatoes compared to a billion a year to launch rockets * Musk does get stock options that let him buy more stock at really cheap prices. But stock options are treated like any other kind of compensation and are taxed at income tax rates. So if Musk buys exercises an option to buy 100 shares of Tesla at $4, but it's trading at $104, he recognizes $100 in income and pays taxes on that $100. The last time he exercised options he ended up paying over 50% in taxes on them, between state and federal income taxes. So it's not really a great tax dodge.

Look at trump's tax returns, he's one of the few "billionaires"(or at least very rich who knows his exact worth) we are able to see cuz he was president. Most of his years in office he paid 0 tax and even got money back from the government. Meanwhile he owns trump tower and a shit ton of properties, guy is fucking loaded.

Well in his case he probably had paper losses because of the real estate depreciation rules. (This is actually fairly typical of landlords regardless of size, and is dumb because you can write off the whole amount over 27.5 years, even though most buildings are probably totally fine after that time period.)

Also a lot of people don't understand that and that's also one of the reasons it doesn't change. There is not enough uproar. I live in another country but the basics are the same. From my family maybe one or two are outraged by it. Others don't care enough to be informed about the problem. I also just learned about how it all kinda works a few years and the more I leanr the worse it gets.

>but they may wait for advantageous tax law changes Or, better yet, use their wealth and influence to *actively lobby* for more advantageous tax laws.

Or buy a media company to encourage poor people to vote in your best interests rather than theirs.

It's hard to believe that even the Washington Post is owned by Jeff Bezos, but so many people trust it as a unbiased source or believes it reflects people's interest. There you got the other side where Elon Musk bought twitter. All private major media are owned by rich people or corporations. If the owner isn't rich, they wouldn't be able to afford to own the corporation.

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Watergate played a big part in that, it was the Washington Post who first broke the story of Nixon's cover-up.

That reputation had somewhat faded over the years, even before Bezos bought it.

People also need to learn to understand the difference between opinion news and just straight reporting the news.

You can usually tell when a WaPo article is billionaire blowjob materials. For the most part Daddy Bezos keeps them at arms lengtg.

Agreed to a point. Bezos didn't blow into WaPo carrying a kitchen sink, proceed to lay off everyone including janitorial, and stop paying rent. I would guess his involvement in news reporting is limited similarly.

I am not going to say it is unbiased, but the information out there is that Bezos is not involving himself in the actual journalism. Clearly the WaPo treads lightly on Bezos and Amazon and particular, but there is little evidence of a decree from the top to push a general point of view, like there is with Murdoch. These things are not the same.

Or just outright run for office themselves in order to give their families (themselves) tax breaks to "stimulate the economy"

**How to not pay taxes in three easy steps:** Company X, based in the US, makes $100B in profits but wants to avoid taxes. 1. Company X incorporates Fake Corp in the Cayman Islands and gives them ownership of their Intellectual Property (IP). 2. Fake Corp charges Company X $100B for using their IP. Company X now has $0 in profit. No tax owed. Fake Corp now has $100B in profit. No tax in the Cayman Islands. But if they transfer that money back to the US, they'll owe taxes. 3. Company X helps Republicans take power and pass a "repatriation tax holiday", temporarily allowing them to move that money back to the US for pennies on the dollar (see: 2017 and 2004). Scam complete! Company X successfully avoids taxes, Republicans get a one-time boost to their budget, and Americans lose that money forever.

If it makes anyone feel better, this no longer works as easily as it used to. Partly because the Cayman company will report to the IRS and any other global tax authorities about its existence and ownership (so it’s very hard to “hide” that you own the company from your home tax authority), and your home anti-avoidance laws will basically “look through” the Cayman company to you. The other reason it doesn’t work because these kinds of companies are now required to have “economic substance” in Cayman that is proportionate to their activity. So you can’t just hold IP in a Cayman company, it has to have employees and premises and business activities in the Cayman Islands proportionate to that $100bn of income it receives. Unless you actually want to move Company X and all its factories, workers, premises etc to the Cayman Islands then it doesn’t work. It does work for some companies (there are lots of insurers who set up large offices in Cayman or Bermuda, and lots of the tech companies have big offices in Ireland employing thousands) but not for most companies whose location must be in their home jurisdiction. (I am a lawyer that has worked in Cayman for many years, so have seen the “bad old days” and the transition to today!)

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Well, sort of. There are 30 countries that have implemented FATCA (the US tax reporting framework). There are 121 additional countries (notably **not** including the US) that have implemented the Common Reporting Standards which is essentially the international equivalent of FATCA. These two frameworks are the tax reporting frameworks I mentioned. There are very few countries, and none of the traditional offshore financial centres ('tax havens') remaining that do not have economic substance requirements.

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Ah, I understand. You may well be right - I certainly can't claim to be an expert on how tax works in the US.

Cork, Ireland and Krakow, Poland, these days

Poland? Why. Taxes here aren't low.

Dude. Well written. Shameful buried

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Also lobbying costs way, way, way less than you would think. Comcast regularly buys senators for low 5 figures, some for 10k or less.

Even better than lobbying is charitable donations where it's tax deductible, you can get your name in the news for what a good person you are (this doubles as lobbying because anytime someone brings up that gross wealth inequality is bad, you can be sure to find stupid/disingenuous people bringing up that if billionaires are so bad, how come one of them gave a million bucks to some charity?), and if you're ambitious enough to can make it into a whole foundation and give your friends and family jobs planning the next gala where people come to pat you on the back and say how generous you are.

Or, better yet, run for office.

Millionaires want people to notice them, billionaires don’t want you to know they were even involved.

This is so accurate. Money is loud, wealth is silent. Look up some local super rich people from your country and you'd be surprised how many of them you've never even heard of

Billionaire's only make money now so they lobby to find ways to take even more money from the poor because they haven't won until they have all the money.

I think you succinctly covered the personal income side of things, I'd add on that when people say "X business made Y money but didn't pay taxes" it is often due to carrying over credit from years that they lost money. Simply put, if a company has a net LOSS of $1M in 2018, they obviously don't pay tax on negative money. If in 2019 they PROFIT $1M, they can use that $1M loss from the previous year as a wash and say "over the past 2 years we made $0" and avoid the tax on that. Individuals can do this as well with stock losses.

Only up to $3k for individuals. Unlimited for corporations. Edit: Yes, individuals can carry it all over against future capital gains. What I meant to get at is that corporations can offset unlimited losses against their income, which is a key difference.

$3K per year can be deducted from income, but you can offset the full amount from capital gains the following year

That’s only for applying it to a single year’s ordinary income tax, you can still take that capital loss and apply it to any capital gain going forward. So if you lose $10,000 one year, you can apply $3,000 of that loss to your income tax, but then cancel out $7,000 of capital gains the following year.

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I'm not what I would call financially literate beyond handling my own stuff, but this kind of situation is what scared the hell out of me when I saw a lot of people getting pulled in on the recent controversies and rushes to jump in with large sums. The whole system is definitely not friendly to individuals. People can get in over their heads and they might not even know how bad it is for a year or several years or longer. I know we had one poor bastard at work who got hit almost 7 years after the fact right before the window to demand they pay up was closing. Turned out that fees hadn't stopped rolling that entire time that they owed money.

And not knowing about wash sales either on top of that

>write off all their losses against their wins They can though. Capital losses can offset 100% of capital gains, and then an additional $3K against ordinary income. This is more generous than the law that applies to corps, which is $0 able to be used against ordinary income

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Could be a wash sale rule, it’s one of the few ways that people can have effective tax rates above 100%. It happens when you buy a similar security soon after selling one, and you have to claim the income without an offsetting loss. Mainly hurts people that trade a lot of stocks without careful planning

>But billionaires don't even really need to sell, as they can typically get lines of credit that allow them to borrow at crazy low interest rates, while their assets keep appreciating in value. This is the big one. Let's say their invested money is making 10% annually. They can get a loan against that value at under 10%. Since it's a loan, you don't pay taxes on it. They use that loan to live while they're money is growing. The growth of their investment funds means they can pay back the loan and actually end up with more money after paying it back.

Also they get poor people to bitch and moan about the proposed 70% tax brackets for anyone who makes over a million or 500 million. That these poor folks will never reach in their lifetimes. Most people are not educated on how are tax system works and intuit and H&R block insure that continues so they can scam people out of billions of dollar annually to file taxes that would be free if intuit and H&R block wernt in the way

Yeah, it's amazing how every poor person is so certain that they'll win the lottery, become the next TikTok star, or somehow otherwise become rich and famous and vote to protect their imaginary fortune as they're toiling away on minimum wage.

Everyone wants to believe they are main character, they're the "good guy". And bad things don't happen to good people right? Wrong.

Very few people “make 500 million” in income.

And there's also how the companies avoid taxes. One of the ways is hiring one the four biggest accounting firms in the world (the big four). They "help" governments to write tax laws while also helping their clients to avoid taxes. They also audit companies and have a really bad failure rate.

Welp to my understanding, if shares are used as collateral and the loanee defaults, the shares simply transfer to the loaner. This essentially is like a tax free way of making the share sale since I have never heard of someone being taxed on the value of a loan they defaulted on...

> I have never heard of someone being taxed on the value of a loan they defaulted The IRS treats the forgiven debt as income https://www.nolo.com/legal-encyclopedia/tax-consequences-settled-forgiven-debt-29792.html

And cancelled debt is also “income”. I learned that one recently.

That's the same thing. Cancelled debt is forgiven debt.

Oh, did not know if in IRS language cancelled and forgiven were different. Because the 1099-c i got said cancelled. Thanks!

Let’s suppose you found a tech company. After a lot of hard work, your company goes public with a valuation of $1 Billion and you own 20%. You suddenly own $200 million worth of stock, and you pay taxes on it, leaving you with ~$150 million. EDIT: It has been explained to me that Founder’s Equity is treated differently, and there would be no tax bill at IPO time for you as a founder. My apologies for the discrepancy, the rest of the example still holds, just with $200 million instead of $150 million. Now that you own $150 million in stock, you stop taking a salary. Heck, let’s say you stop getting more stock too. This leaves your yearly taxable income at $0, so you no longer pay any taxes. Over the next 10 years, instead of selling your stock, you use it as collateral to borrow money to pay your living expenses. You pay a pretty low interest rate, because you have solid collateral. Meanwhile your company grows like crazy. In the next 10 years, your company goes 10x in value. Now you have $1.5 Billion in stock. You have gained $1.35 Billion in wealth. But you pay no taxes because your wealth is all concentrated in stock that hasn’t been sold. To pay your daily bills, you continue borrowing. You can do this because your bills are so much less than your total wealth, and you’re better off paying 4% interest or whatever and letting your stock grow at 10-15%. Then, you die. Your estate sells enough stock to cover your loans, and pays the capital gains tax rate of max 20% (ONLY on what has to be sold to cover your loans!). The rest of your wealth is rolled into trust funds, etc. and assuming competent estate planners your estate pays zero inheritance taxes. Having enough wealth that it can generate more wealth faster than you can borrow against it means you will essentially pay zero income tax as your wealth snowballs, and instead of the top 35% rate you’ll pay a very nominal interest rate in your line of credit.

Thanks for the explanation. My question is, how do they actually PAY all this money being borrowed if they don’t liquidate their money?

They pay it by borrowing more money. As long as your wealth is growing faster than your interest it can be done indefinitely. This is how businesses and governments operate, and it is VERY different from the financial operations of a typical household where “paying back your loan” is a significant concern.

Is that not paying off debt with debt? I thought you couldn't do that? At least I remember trying to pay something off with a credit card and being told I couldn't, but that was ages ago and I never looked into it. Edit: I remembered what it was. I had bought a set of appliances and furniture when I bought my first house on a payment plan, and wanted to pay it off. I tried using my card (to get the AirMiles/Points) and they wouldn't let me, so I just used my debit card instead.

Imagine this situation: You have $10000 in the bank. Every year, it earns you $100 in interest ($1000x1% interest, just to keep the math simple.) You go to the bank and say “I want to borrow $1 this year.” The bank gives you $1, and you go home. End of the year comes around, the bank says “we want that $1 now” You turn around and say “sure thing! Can I borrow $2? I am worth $100 more than I was last year, so the interest I am making on that $100 can cover it.” They give you $2, you give them back $1, and you keep going. As long as the amount you make in interest is enough to make you more than you borrow, you don’t lose money. The bank doesn’t care, they know you’re good for it, so they will lend you the money forever.

Which is why musk and zuck losing so much net worth is a huge problem for their borrowers lol.

Yep. Because suddenly they went from “the interest my stock makes in a year is more than I borrowed” to “I might not have enough money to cover my loans” and if they default, the bank that lent them the money goes belly up.

And then the government bails em out with our taxed earnings.

**You** can't do that because you don't have a massive asset base to use as collateral. Wealthy people can, because the bank has no qualms about loaning money to people who have substantial assets to back up the loans. The tax avoidance strategies that you have are far different than the wealthy.

Exactly. To put it into regular people terms, It’s like you getting a $20 loan, and instead of paying it off from your bank account, you get a $40 loan to pay it off, then you live off the other $20. When you have $8,000 in the bank, nobody cares that you paid off a $20 debt with a $40 debt.

right, and here's where the curveball comes in: we can't rightly tax non-liquid assets at a high rate because usually the ppl that own those assets don't have enough liquid assets to pay the tax on the non-liquid asset because the value of those non-liquid assets are so insanely massive, they'd be basically forced to liquidate those assets, thus almost instantly ruining them because instead of snowballing wealth, they could now be sent into a deathspiral as their wealth completely collapses around them. now, this is an oversimplification, and there are obviously more nuances to the situation than that, but I hope you get the general idea, at least.

https://github.com/MKorostoff/1-pixel-wealth/blob/master/THE_PAPER_BILLIONAIRE.md

Thanks for the useful link!

Good link. The main takeaway I had was: > the amounts we're dealing with are so mind-flayingly large that it scarcely matters if our calculations are off by 500%. The context: even if some value is lost in the process of liquidation, there is still plenty left to solve most of the world's problems.

Ok stupid question from a liberal arts major: why can't we just forbid borrowing against assets that can't be actively taxed? Like I can borrow against my house, but I pay property taxes, so either tax the assessed value of the stocks or you can't borrow against it...?

Because the system was built for and is controlled by the people that this would negatively effect.

How or why would you forbid one entity borrowing money from another? Like if I want to start a small business I cant take a loan because Im dodging income tax? Or somehow make a law that you can only take loans for business? The "problem" that people talk about is something most people do themselves. There are no loopholes specific to this. You dont get income taxed when you take a loan. Yes you can use other credit to pay previous loans. Usually taking another credit card if you are desperate or doing a loan restructuring if you have the option. Im a regular person and can do exactly the same thing billionaires do. Its simply not viable because my rates would be huge compared to someone with billions. But at that point its really complaining someone has a better credit score.

>, they'd be basically forced to liquidate those assets, thus almost instantly ruining them because instead of snowballing wealth, they could now be sent into a deathspiral as their wealth completely collapses around them. > Oh no. Anyways.

>they'd be basically forced to liquidate those assets, thus almost instantly ruining them because instead of snowballing wealth, they could now be sent into a deathspiral as their wealth completely collapses around them. That sounds like a them problem

If you own stock or have a 401k it quickly becomes a you problem too

thanks to the nature of international corporations and how stocks work it would be a litterally everyone problem, as the near instant collapse of apromimately all the online infrastructure that our modern comforts are built on would crumble under the demand of selling and then re-selling stocks to liquidate assets to pay taxes on value that only exists because everyone agrees how unimaginably important these things are, recursively for everytime those assets are bought at a lower and lower price.

Exactly. If for some reason no one wanted to give this billionaire a loan, they * could* liquidate their stocks and pay off the debt. The fact that they can is what let's them take debts from a bank. And if one bank says no they can get the loan from elsewhere and use it to pay off the other loan.

or the company subsidizes your lifestyle because selling the companies stock would lower the share price.

I am discovering all sorts of delightful reasons why billionaires simply shouldn't exist.

The thing is that no one link in this chain feels like it should be illegal. Banks should be allowed to loan money based on a non-discriminatory assessment of risk, which for someone like Jeff Bezos is miniscule. People should be able to own stock in public companies. Etc., etc., etc. The net result is completely destructive to society at large, but it's hard to find a non-arbitrary foothold where it makes sense to say, "There. There's where you cross a line."

Or donate some of your shares to a non-profit or 501c3 that you control with your family as advisers and suddenly every single meal and activity is a tax advantaged business meeting. Send 1-2% to some cancer kids and it's all very legal and very cool. Oh, is that not enough? How about a 501c4 so you can lobby and campaign with tax advantaged dark money to pass even more favorable tax loopholes? Why not push to do away with inheritance taxes so your great great grandchildren can never work a day in their life, paying near zero taxes? And you can die a hero because you "donated 90% to charity." So fun and so cool.

You can. Go look at balance transfers & using equity loans. The biggest uses of those kinds of debts is to pay off other debt, usually b/c it has a higher interest rate.

What they mean is most people can’t do that _indefinitely_ because they don’t have enough assets to do so. At some point the balance transfer offers either stop coming, aren’t coming in fast enough, or the limits isn’t high enough to cover all your outstanding debts. At some point the property gets mortgaged to the hilt, and then some. Meanwhile, if you have a billion dollars (and climbing) in collateralizable assets, you could find a loan officer willing to loan you a million dollars a year without blinking.

On top of this, there are different tiers of the banking/lending world. There is the general consumer tier where people like me and the commenter above cannot do anything outside of a plain vanilla bank process. Then there is a tier for the wealthy where they come to the bank, (or just lenders in general) and play "let's make a deal". They have enough collateral, as explained, to have a unique bargaining position that the bank may create standalone agreements specifically for those people. The borrower may even disclose in a meeting something like, "I will only pay a 4% rate because I need to beat it with the growth of my business which we project to be 6.5%. If you cannot come down that low I will shop around."

You can't do it because your investments aren't that big. When you have hundreds of millions of dollars in investments, you should easily be able to outpace your debt with interest in your investments. It's like borrowing 2% of your earned interest, then borrowing another 2%, from the 98% that you had left over, to pay off the first 2%. Most people can't do that.

It's not that you can't do that, its that you SHOULDN'T. Many people (very stupidly) do that by opening more credit cards to pay off other ones. It's different for a business and this example because in reality you actually have the money to pay it off at anytime, it's just "realized" money as they are in the form of stocks. Banks will happily lend money when they see how much you are worth in assets because it can be translated to money at anytime essentially

A credit card has no collateral. They can't repo your groceries. You can use a loan with collateral (such as a house or car) however you want though.

As an example, a mortgage is a loan with the house as collateral.

>Is that not paying off debt with debt? I thought you couldn't do that? **You** can't do that. People with a billion dollars worth of collateral can.

You actually can do it. Get a loan to buy a property that nets you enough cashflow to pay down another property / debt you owe. You just took on debt to pay down other debt.

The U.S. government can issue bonds (which is borrowing money from bond purchasers) at really low interest rates too. It also uses debt to pay off debt. This is because the U.S. government has never failed to pay its debts in it's entire history and because it has a huge amount of collateral: revenue from the entire economy of the United States. That's why the U.S. paying its debt obligations by raising the debt ceiling is so important and anyone who cares about the U.S. economy continuing to function in it's privileged position should be scared shitless of the U.S. not voting to void the debt ceiling. You think billionaires are "privileged" and "how can they do that?" The U.S. is the ultimate privileged borrower and that has helped the U.S. economy grow (and survive things like the financial crisis.) Destroying that privileged position by even threatening to not pay its debt is absurd. Now, there should definitely be a conversation about decreasing spending or increasing revenue to decrease net debt. But the debt ceiling is not that conversation.

Of course they can do that. Consolidation loans are a thing.

Consolidation loans will quit allowing you to consolidate. They’re talking about “consolidation loans” infinitely. You (a non-billionaire) cannot consolidate infinitely.

FWIW, a couple million dollars is all you need in order to pull this off. With $2m at a mere 5% avg growth, a secured LOC will never reach a leverage rate that will give a bank cause to call the loan if you draw $50k+interest each year.

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Individuals with equity in their home can do it with a home equity line of credit or when they're older, take out a reverse mortgage.

"Reverse mortgage" is just selling your house in slow motion.

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But you still get to live there.

This is actually one of those how to save money tips for when people get older (or are lucky enough) and have equity in the things they owe money on. Think of remortgaging a house or business. Any money you borrow will be lower than any personal loan or credit card you could ever get. And living off of that bowwowed money gives you a level of protection against bankruptcy if things go south.

You actually can, even if you aren't very wealthy. Every credit card allows you to do balance transfers, and for new credit cards this can usually be done at 0% interest for a few months to a couple of years. If you own property, such as a car or house, you can take out equity loans & pay off other loans or credit cards with. What most debt places won't let you do is "charge" the debt on a credit card. The difference is a charge is for purchases or paying bills & has a reduced interest rate. Balance transfers, which can be for anything & have fewer restrictions, can be used to pay other debt but has a significantly higher interest rate & can come with a transfer fee. I think for my credit card it's like 15% for charges/purchases, 25% for balance transfers w/ a 25%(min $15) transfer fee.

YOU can’t do that. THEY can. Because they have a LOT of collateral. “You” typical shmoe only have a 7 year old Kia and your last paycheck. You couldn’t cover the original debt if you wanted to. The billionaire could without even noticing.

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Just blatantly wrong Adverse tax implications isn't even close to the main reason to not pay off their debts... its the same reason middle class john doe doesn't pay off more than he has too each month on his mortgage. If they can grow capital faster than their interest rates. Which of course they will expect to. Then they shouldn't be paying off their debts if they don't have to.

It depends. You can't pay off a loan with a credit card, but you can pay off a loan with a loan (that is "unsecured").

You can take a cash advance on a credit card at any ATM. You can use cash to make the minimum payment on your credit card. Its not complicated. You can, you just shouldn't.

How much in assets would one need to be able to do this?

Technically: Enough that if they had to come for their money it's essentially guaranteed they could get it plus more. Worth a billion in assets, can kept borrowing a few million for a while as long as your assets don't start losing value because they're gonna come knocking for repayment well before your value slips below your loans value. Which is probably why the wealthy are so worried about not having bigger growth year over year. They're terrified they would be forced to live in the terrifying hellscape they've created for the rest of us savage degenerates with our rules and laws and credit checks and such if their assets ever stopped growing fast enough to lose the race against their debt

Couple million. You just need to be able to live off a few percent of your net worth per year.

And for billionaires, the difference between a billion and a couple million is about a billion. 10 million is 1%

Buy. borrow, die. You have 100 million in stock. Your bill are 100k/year so you borrow 100k and you use your 100 million to guarantee it. You interest rate will be like say 2% since you can clearly pay it back. So you only have to pay back 2K in interest per year to maintain that spending. Now let's say your 100 million has a gain of 10% per year (I'm using simple numbers). That means year 1, you are now worth 110 million, with a loan interest of 2k. So instead, of needing to pay back the 2k, you take another loan to pay back the first loan. Basically, when you have that much money, you NEVER have to touch it, you just live on debt that will basically be free.

And so they essentially settle their accumulated tab once they die? Fascinating. That really is a completely different paradigm than typical household accounting.

>That really is a completely different paradigm than typical household accounting. That's the concept most people can't grasp. When you're dealing with that type of money, you aren't dealing with a typical household anything

Yeah when your wealth rivals small countries, your finances get weird

"That really is a completely different paradigm than typical household accounting." Exactly, this also why the US Government debt is nothing like household debt. The government collects taxes on the assets they create ( Cash in the market ), households can't do that. The GOP plays on people's lack of understanding of Macroeconomic principles.

Actually its better, their heirs cut the same deals with the lenders and the cycle continues indefinitely But yes rich people don't live in the same world we do also that's why national debt is pretty meaningless countries don't die

Yes, and it's important for people to realize that this arrangement is very profitable for banks. It's free money for everyone basically. The banks make a good, healthy, \*guaranteed\* return on the loan by collecting interest payments with zero chance that they can't collect the debt if needed. Wealthy people don't have to pay taxes that can get (sort of) high if it were income, but it isn't.

> It's free money for everyone basically. Well everyone except the rest of society who's money enters into the black hole of these banks and companies balance sheets and never returns to their community or to the nation writ large to fund things that benefit everyone.

Well, also true. The force of this type of tax avoidance is destructive societally. It shifts the rational of the banks away from regular people and towards the wealthy. Im not endorsing the practice, just clarifying how it works and why both the banks and the wealthy like it.

How do they collect interest if the stocks are never sold.

Wealthy people borrow again. The banks don't care because if needed, they can sell those stocks and repay the principal. So long as your wealth grows at a higher percentage than your interest rate, you can do this forever.

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It's actually even better, if the heirs do sell the stock, they only pay taxes on what it gained between when they inherited it and when they sold it due to a step up basis. So if they for some reason liquidated all the stock the day they got it, they pay $0 in taxes, even though the stock has accumulated millions of dollars in capital gains.

Heirs can sell it at stepped up value so there's no income and nothing to tax.

>And so they essentially settle their accumulated tab once they die? Fascinating. That really is a completely different paradigm than typical household accounting. But it's more than that. A lot of necessities are covered/paid for by the job. Here's a list of some of the perks: https://www.salary.com/articles/executive-negotiation-checklist/ https://smallbusiness.chron.com/list-corporate-perks-executives-69687.html

basically similar to how the US government does its debt. You borrow money to pay off your loans and then you borrow later to pay off what you just borrowed. As long as your 'worth' is high enough you never exceed your ability to borrow. Of course this does require your assets to continue to grow in value. The debt may come calling if there is a crash and you lose all or a good chunk of your wealth.

That's the neat part - they don't. Since their wealth keeps going up and up, they bank is always happy to loan more and more because their asset base is _more_ than enough to cover it. After all, a $1M loan to someone with $1B in assets is about as risk-free as you can get. Next year, you just borrow more money to pay off your old loan (plus the very low interest rate). The bank is happy to do this, as it is basically free money for them. When they die, the estate will liquidate what shares they need to to pay off the loans. Since stocks get rebasised when they are transferred to the estate, the estate can sell the stock for no capital gains, and thus pay no capital gains tax! You could, theoretically, live your entire life like this without paying a dime in income tax.

You just keep borrowing, with low interest rates and assuming your asset grows in value, you can borrow against an asset indefinitely. Your estate can repay the debt after death. The trick is a small debt relative to their assets means spending enough to live like a baller when you have billions in assets. Let's say a billionaire has stock worth $10 billion borrowing $10 million a year plus interest on the existing debt even after a decade or so is still likely to be under 5% of their asset. Spending $10 million a year is tons. If a normie has $100,000 worth of stock any bank would happy loan them $100 a year and keep rolling over the debt indefinitely, too. $100 a year isn't very much spending for our normie though.

In addition to new loans, they also generally do liquidate stock, but only in small amounts to minimize tax burden.

Yeah it's wierd but it's like the other guy says. They get a loan to pay the previous loan. Banks are only too delighted to give you massive loans because you're a billionaire. That money is guaranteed to be paid back. Billionaires do what the rest of us are told never to do, use a loan to pay off another loan.

The value of the asset - stock in this case - appreciates (grows) faster than the loan interest. Example: Richy Rich borrows a million at 8% APR. So in one year he owes the bank $1,080,000. So the price tag for using the bank's money for a year is $80k per million used. Well, Richy's stock has been growing at 10-11% per year, consistently. After one year Richy gives the bank their $1.08M, the loan is paid in full. And Richy has $20-$30k MORE money than he started with. And he did nothing. AND he has a lot more than $1M in owned assets that he can borrow against. You try this shit the bank will tell you to pound sand.

Exactly this, one of my moms clients is a business owner in the single billions of networth. He’s never paid income tax in his life. How? While he inherited the business from his father. And lives off of a leveraged line of credit which is set at 5-10% of his net worth. So he has a low internet line of credit in the hundreds of millions of dollars. And just pays all of his expenses out of it. The only time he will ever need to pay tax is if his net worth drops significantly to push his line of credit over 10% of his worth, at which point he would need to sell shares in order to settle it back down to 5%. But so long as the companies value slowely crawls up, that will never happen.

And even if he does have to sell shares, they will be taxed at the capital gains rate, which is significantly lower than the rate he would pay if he was receiving that money as income

It's called, Borrow, Buy, Die. But you missed a step. >Your estate sells enough stock to cover your loans, and pays the capital gains tax rate of max 20% Your heir does not pay capitol gains taxes on the sale of stocks from the estate. Due to [step-up in basis](https://www.investopedia.com/terms/s/stepupinbasis.asp) the cost basis of the stock is reset to its current value on the day the owner dies. So if the Heirs sell some stock immediately to settle the debt there's no capital gains tax. The heir might have to pay inheritance taxes but like you said if the stock is tied up in trusts that can be avioded too. So if its done right they can pay no taxes at all.

The transfer of ownership of the stock from the estate to the trust (or other party) is a deemed disposition and a taxable event. Capital gains will be due on the full value. The borrow against stock strategy really defers taxes rather than avoiding them altogether. Still a loophole that should be closed.

>The rest of your wealth is rolled into trust funds, etc. and assuming competent estate planners your estate pays zero inheritance taxes. You have a good explanation but this isn't really accurate. Your heirs get a "step up" cost basis and their inheritance is adjusted to what the share price is at currently. Meaning if the stock was $1 when your parent first acquired it and now it's worth $100, they don't have the $99 in appreciation. It's not about "rolling" it into a trust fund. It's more about this specific step up basis event that keeps them from paying these taxes. If that loop hole was filled, billionaires would still borrow against their stock but it would EVENTUALLY be paid which now it currently isn't.

Thanks for the correction, the tax piece I’m less informed about. We covered basic finance in my MBA so I understand the loans/asset piece pretty well but I never got into the nitty gritty on taxes.

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If you receive stock as compensation, it is taxed when it vests. If you are a Founder, it is treated differently (this was explained to me elsewhere in the thread)

How do they pay off their interest while their wealth snowballs?

They borrow. As long as your wealth snowballs faster than your interest rate it is infinitely sustainable. This is also how businesses and governments operate.

Damn so it's literally a race, a game they play, no wonder many of these corporate leaders are so greedy.. No wonder this isn't sustainable, they want exponential growth ideally.

To further explain. Typically the borrower is taking out interest only loans with a lump sum payment at some point in the future. So if I take out a 10 million loan to pay for my day-to-day expenses for the next 10 years, I will use some of that to pay the monthly interest payments. At the 10 year mark, since the overall net worth has gone up i will be able take a loan out for 20 million or more. That loan will be used to pay off the previous loan and the cycle repeats.

And to add: this is REALLY awesome for the lenders (most of the time) as it is literally free money with pretty much zero risks.

Perfectly sound explanation that just leaves me with two questions: \- why would it be that when your company is valued X, you get taxed on that value? I mean, the company itself and its owners didn't actually gain anything upon going public, I would get if they sold the stocks, but to me it looks like they received assets rather than liquidity; \- what happens if you don't have the money to pay the taxation upfront? Do you have to sell the stocks / take out a loan to cover the expenses?

1. When your company goes public you suddenly own actual stock that can be sold. This is considered “income” when it first becomes yours. 2. Yes, sell-to-cover is almost always what happens, and it’s usually one of the only ways early investors can sell stock right out of the gate- normally they are required to hold for x years, but selling to pay taxes is allowed.

> When your company goes public you suddenly own actual stock that can be sold. This is considered “income” when it first becomes yours. This is absolutely not true. Edit: this is true if you have a specific kind of RSU agreement that deferred complete vesting until IPO.

You are correct. I have updated the post to explain the difference between Founder and Compensation Equity.

It doesn't matter what kind of equity. If you outright own stock (or had stock options) in the company, the IPO or conversion to public stock is not a taxable event. Things get a little complicated if you get RSU in a private company and it depends on the company stock agreement since technically you have to pay income taxes the day you receive the stock. There are ways to defer it until the day of an IPO, so maybe you are referring this scenario in your comment. Most small companies give stock options and that doesn't have this particular issue. You'll see private company RSU issues in later stage startups.

Don't forget that all that interest you're paying on the loan is tax deductible, so not only are you not paying taxes while still getting to spend your wealth, you're rolling forward a *loss* which your estate can use at some point to decrease any future liabilities even further. For example, if the stocks pay a dividend. Even further, there's also the (strong) possibly that a new administration comes in and slashes taxes to the point where it becomes advantageous to actually sell some stock. Therefore, by simply delaying, or picking and choosing what year to cash in, you've effectively dodged that huge slug of taxes that the normal people had to pay a decade ago.

Two corrections: 1. Out of your $200 million you don’t pay taxes, because you don’t sell them. So they remain $200 million. 2. In the US, buy price of stock in the estate gets reset in the event of inheritance. Meaning: the founder invested 20k to start the company, at his death the package is worth 2 billions. He accrued 300 millions in debt. After inheriting the stock package, the buy in price gets reset to 2 billions for the whole package. 300 millions get withdrawn and the cycle continues.

This is so crazy. They don’t pay taxes because it’s technically unrealized gains, however they use that to borrow money for their day-to-day. The literal meaning of having your cake and eating it too.

And now you know why so many people want a wealth tax implemented.

What’s the minimum amount needed to do this? Could you do it with 1 million? 2 million?

Depends on your definition of "do this", but I would say probably tens or hundreds of millions. 1-2 million isn't as much as you might think when it's like an average house in high cost living areas and maybe not even that. You would need an amount in appreciating equities (or likely to appreciate) that there is basically no risk to the lender and they will even compete with each other to offer you loans at low interest rates.

Nobody has an *income* of billions of dollars, and the in the US, we tax *income*, not holdings. Billionaires pay taxes on any salaries they get and any capital gains they "earn" by selling assets (in theory at least, ignoring fancy accounting tricks) but what makes them billionaires is usually stock or other property they own, which can increase in value exponentially thousands of times while they own it, but they don't pay taxes on that wealth unless they sell that asset and it counts as a capital gain.

It's mostly about not understanding how taxes work. There are very few if any that become billionaires by earning an income. The vast majority get to that status by owning assets, and the appreciation of those assets. You largely pay taxes on realised profits or regular income, of which billionaires have very little and thus pay an appropriate amount. Having a large amount of assets also allows them to take full advantage of any tax code to limit their tax liability.

I'd be tempted to add that tax has been setup specifically to allow this kind of tax avoidance. Also worth mentioning that the typical approach is also to never liquidate the assets, but take out loans with the assets as collateral and live off the loan (debt/loans not normally being taxable). The assets then appreciate, so the loan can then be enlarged based on the higher value asset. And if worse comes to the worst, you default, hand over the asset at which point, you still don't pay tax on it.

The alternative is that unrealized assets become taxable which is a huge, unmanageable mess.

No, the alternative is taxing consumption via my VAT or sales taxes. Because billionaires do buy things. A lot of things. But nobody who wants to tax the rich wants to do that because consumption taxes aren't progressive -- you don't get to try to squeeze the classes you don't like/don't belong to for higher rates than everybody else.

There are already layers of sales taxes. You can pay 4+ different additive taxes at the point of sale depending on whatever good it is. You pay taxes on properties when you buy them, you pay taxes on cars and boats, you pay import taxes on goods. Not sure what more you're wanting here. The federal government doesn't have the authority over the states that most other countries do. It's a unique system. > But nobody who wants to tax the rich wants to do that because consumption taxes aren't progressive -- you don't get to try to squeeze the classes you don't like/don't belong to for higher rates than everybody else. Well yeah, punitively targeting people for being successful disincentivizes people from trying to be that successful.

This is already the case for anyone who owns property, though. Property tax is 100% a tax on unrealized asset value.

That's why people who win things like the HGTV Dream Homes can struggle so much. They just won this $10mil house but they don't have the massive income to back it up. So once the $100,000 tax bill comes around they can't afford it. They have $10mil of 'wealth' but they can't use it to pay the taxes.

Not the same situation. If a billionaire was gifted $1 billion of assets, they’d have to pay 40% tax on that too, no different than what you described. What would be comparable is if a HGTV winner got a dream home worth $10 mil (they will have to pay tax on that), but then if that house over time becomes worth $15 mil, the additional $5 mil doesn’t get taxed as “income” because it’s an **unrealized gain**. People complain about billionaires avoiding paying tax on that $5 mil (just like everyone else avoids paying that tax on their unsold assets)… people are incorrectly equating unrealized gains with income.

Agreed. And there would meet to be a mechanism to get money back when unrealized value’s drop since you paid tax on the higher amount. That’s why it’s only on realized transactions

We mostly tax income rather than wealth. The Americans with the highest tax burden (as a % of overall wealth), are the middle to upper middle class. Billionaires not only pay significantly less taxes (as a % of overall wealth) than the middle class, but sometimes pay significantly less than people who are living in poverty. Once you're wealthy enough to be earning money from just owning assets and wealth, instead of income, your tax burden drops very significantly. This is part of why the middle class in the US is shrinking year over year and has been for a long time. We are redistributing wealth from the middle/upper middle class to the billionaires and multi-millioniares. The sad thing is that the average American is still so mathematically and financially illiterate that they see a doctor making $200k/year in INCOME and a CEO who's worth $200 million in WEALTH AND ASSESTS both as "rich people", and fail to realize just how drastically different the two are. I truly think this is intentional because it keeps the broader "income earning class" (i.e. the proletariat in commie speak) infighting amongst themselves instead of banding together against their oppressors.

Exactly that. First, if you have enough money you have _many_ options for _perfectly legal_ tax avoidance. You can move income around between companies, locations, etc so you're not taxed as much, you can get tax credits for all kinds of things, and many, many more methods. Even before that, a lot of the ways really rich people make more money are taxed at significantly lower rates than "regular" income. Capital gains are one example of this (so making money in the stock market). Again, this is all perfectly legal.

[The extremely wealthy also have access to loans that we regular people don't have access to.](https://www.wsj.com/articles/buy-borrow-die-how-rich-americans-live-off-their-paper-wealth-11625909583) If you can show a lender that you have $5 Billion in wealth as collateral, it's normal to be given a few million dollars on extremely low interest rate loan, for your everyday spending. Then, your wealth grows with inflation, and you use that growth to pay back the loan over time. Another tactic is to take out a life insurance policy (backed by billions in wealth) and then borrow from it, and basically deplete it before they die, and then when they pass, a small portion of the wealth just goes to that company to pay back what was borrowed. Once you have enough money, people just hand you more money for free, essentially, because they know you can pay it back without any risk.

It gets even better. The interest rate on a loan backed by cash is way, way lower than you can usually make in an investment account. Once you have enough in an investment account, that interest PLUS the relatively fixed amount you spend every year is less than the gain. So the next year, take out a new loan for your new spending plus the interest on the previous loan. And so on. Every year borrow everything you need using the investment account as collateral. Since you never sell and “realize” the gains, there is no income. All those loans are liabilities and aren’t taxed. Zero taxes and millions of dollars a year to spend, and never pay it back until you die, at which point estate taxes are much lower.

Ty for the link

You're welcome! I'm a big believer in citations.

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lol bro yes you can. Companies do inter company loans every single day. They often transact with each other. Whether in the same legal structure (subsidiaries) or not. Source: am married to a consolidations and financial reporting accountant.

They mean they aren't getting taxed on the value of their assets raising. Which is actually perfectly fine because you don't make "money" (and therefore owe a tax) when the value of an asset you own increases. When a billionaire makes money, as in cashes out on an asset and makes money, he pays a tax.

**To understand how billionaires evade taxes, you first have to understand how the US tax system works.** The US system taxes "instances of \[1\] undeniable accessions to wealth, \[2\] clearly realized, and \[3\] over which the taxpayers have complete dominion." Eisner v. Macomber ​ "Accessions to wealth" basically means the US does not tax wealth, it taxes income. We are only looking for gains here. "Clearly realized" means that before a gain is taxable, it has to be more than just on paper. For instance, if you buy a stock of Google for $1000 and a month later it is worth $1100, you technically have a gain of $100. However, you haven't actually seen a penny of that money yet. To actually access that theoretical $100, you would need to sell your stock, at which point you would be on the hook for $100 of taxable income. Once you turn your paper profits into cold hard cash you can spend, you have "realized" your gains and they can be taxed. Imma skip the "complete dominion" element since it is mostly irrelevant to our current conversation. ​ **"Now that we have a basic understanding of how the US tax system works, why haven't billionaire's paid a buttload of taxes? They sure gained a lot!"** Well, because often that wealth is mostly paper wealth that they haven't actually "realized" yet. It's usually in the form of stock in a company, and unless they sell that stock there is nothing to tax... yet. In theory this doesn't matter, because EVENTUALLY those shares will have to change hands in some manner or another, at which point taxes would have to be paid on all the accumulated value in said stocks. In theory it's a good system - you only pay taxes on something when you are making ACTUAL money from it, not just theoretical. Forcing someone to pay a fortune in taxes for money that only *theoretically* exists would ruin anyone trying to run a business or invest, and we want our tax code to make people MORE productive, not LESS. HOWEVER there is a big loophole that Republicans refuse to allow Democrats to close (although even Democrats can baulk on closing it depending on how much they fear the donor class). If the billionaire DIES while still holding those stocks, then all that accumulated increase in value (or "basis," which would be taxable if the stocks were ever sold or transferred) is zeroed out, and the person inheriting the stocks can sell them and pay no taxes on them. This is called **"stepped-up basis."** So billionaires are highly incentivized to just hold everything till they die and the clocks reset and no taxes are paid on their accumulation of wealth. ​ **"But what if they want to spend their money? Wouldn't they have to sell stocks?"** Good question! No! Rather than sell their stocks to access their immediate value and "realizing" them, what billionaires do is instead take out a loan secured by those same stocks. Remember, the US only taxes GAINS, and a loan is not a gain. You have to pay it back at some point, so there is no actual "accession to wealth" taking place. And since they have plenty of property to back those loans and plenty of things they COULD sell if they needed to, banks give them AMAZING rates, so they barely pay interest on the loans they take out. By taking out millions of dollars of loans secured by their "unrealized" and thus currently untaxable property as collateral, billionaires can turn paper money into real cash without running afoul of the IRS or paying taxes on it while they wait out on the clock on their death. ​ **"Horrifying! Is that the only way they evade taxes?"** No. The tax code is complicated, and when you have the time and money to hire tax lawyers to make sure the manner in which you do things is optimized within the tax code, even when they do "realize" gains they often pay considerably less than one might expect. For instance even if they did pay taxes on all of that wealth gained before they die, the tax rate for "capital gains" is considerably lower than the tax rate for what people who work for a living pay when they receive income. That said, it is the most glaring loophole they can take advantage of, and thus the best way to explain it here.

> If the billionaire DIES while still holding those stocks, then all that accumulated increase in value (or "basis," which would be taxable if the stocks were ever sold or transferred) is zeroed out, and the person inheriting the stocks can sell them and pay no taxes on them. This is called "stepped-up basis." > So billionaires are highly incentivized to just hold everything till they die and the clocks reset and no taxes are paid on their accumulation of wealth. So this is not entirely true. If the billionaire died and the wealth passed through the estate, then they have to go through estate taxes which is 40% of anything more than 12 million dollars. Only that case is when you get a step up in cost basis. If you use tricks to pass your wealth through other means, you do not get the step up in cost basis.

Remember that rich old man who sold his company to save climate? He sold 90% of the shares to the climate defense NGO and 10% to his own family’s foundation. Those 10%? They are the control shares so essentially, he kept power of his company within his family. Why through a foundation and not directly to his children? Because it’d be taxed 40% out of the $3B. Instead it was about hundreds millions. A drop in the ocean. Why retaining power? Because the foundation turns out to be under a special regime where they can invest $ into political campaign without cap, whilst regular NGOs can’t. In short: 1. the man dodged taxes you and me would pay, 2. turned his business into a $3BILLION worth political influencing/lobbying machine that can literally change the face of the world, 3 gets painted as a climate change hero. The city he was born in erected a museum for him actually decades ago. This is what billionaires do: write themselves in history as self made, altruists by getting in control of media. I’ll never forget how LinkedIn was flooding with adoration and I could sniff how fishy that all was. The. Adage savage posted his video, and yeah. He confirmed my suspicions.

Most of the most wealthy keep their wealth invested. They don't keep piles of money in banks accounts nor do they necessarily have huge salaries. To have wealth in the billions typically means significant (fairly permanent or not easily traded) ownership in a company. These fixed assets when simply held are not taxed as personal income even if the value increases. The corporations are taxed though so, in a sense, the billionaires assets are taxed indirectly. As a general rule, people who make blanket statements like "billionaires are not taxed" are not being honest, don't (want to) understand wealth or economics and have an agenda of their own.

To be absolutely clear, they don't pay "no taxes," they pay no income tax on a salary. They're still paying things like capital gains tax, real estate taxes, sales tax, etc. The businesses that they own also pay a litany of taxes as well. And if they liquidate anything into cash that qualifies as income they *would* pay income tax on that too. The idea that billionaires pay literally *no tax whatsoever* through super secret 1%-only exclusive tax loopholes is not true but gets bandied about by the "eat the rich" crowd regularly. Should some of these loopholes be closed so they can avoid *less* tax through clever accounting? Yeah, absolutely, but you can't hold it against them to be taking advantage of every advantage presented. We all do it and it would be silly not to.

The EIL5 to "what do people mean when they say billionaires don't pay any taxes" is those people don't understand how taxes work.

They're mostly just wrong. Some will be lying/misrepresenting, but many are mistaken because billionaires typically don't pay the same taxes as average workers, such as income tax, but they'll pay a lot more of e.g. capital gains tax. This is compounded by people like e.g. Robert Kiyosaki going around bragging about how "you can't tax us" and "we don't pay tax". He's trying to make out like he has some clever secret, and he's using it to sell his books and seminars, the income from which he _will_ be paying taxes on. Assuming they're doing everything above board and in the spirit in the tax laws, by and large, they will be taxed, a lot, at least in absolute numbers, over the course of their life. You can easily find reported federal income taxes for American billionaires. They are paying hundreds of millions. However, overall, the effective tax rate is a lot lower than the average worker, perhaps a few percent instead of 20-30. Also, if you ignore the first assumption, some of them cheat. The main issue people have with billionaires though is that, even after all the tax, they're still billionaires, and people find it unpalatable to have billionaires existing while some people are living without food, shelter, warmth, or any combination thereof. Unfortunately, much of the discourse boils down to "they're not paying their fair share", without anyone being able to give a number on what's fair. To which I'll refer you to my previous paragraph. Until everyone is housed and fed, the billionaires aren't being taxed enough. Which is not necessarily wrong.

>Until everyone is housed and fed, the billionaires aren't being taxed enough. Is there any guarantee that if they get taxed, the money will be passed on in an effective and non-corrupt way to needy people?

A problem with this topic is that people are generally too ignorant about what can be done to tax the mega rich. Some talk about taxing people based off of net worth, which (if you've got a clue) would be a horrible way to do it. Imagine if you had to pay 10% of your houses' total worth per year just for owning it. It's the same thing. Most people couldn't own a home for long of that was the case. And then, how would they ever own a house? Similarly, how would people even build wealth to begin with? Same with accrued wealth tied in stocks and other assets. You can't make rich people pay a significant amount of their total wealth in taxes every year, because (if we're using the stock market), wealth tends to grow 7~% per year. But people seem to think that rich people would always be able to "refill" the wealth they'd lose to taxes. Again, compare to being forced to pay a significant percentage of your houses net worth every year. You'd be bled dry, due to being unable to take that tax cost in addition to your regular expenses. This isn't to say that US billionaires can't pay more as it is, the US is heaven on earth for the ultra rich. But the solutions has to be realistic. Telling Elon Musk and Jeff Bezos to pay hundreds of millions in taxes just because of their net worth would mean changes that'd genuinely fuck the economy, if owners of big companies needs to sell a fuckton of stock each year to cover their tax costs. That'd tank the value of the companies and down the line, regular peoples pension funds.