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Genuine question because I'm out of the loop: it looks to me like the "Bezos doesn't pay taxes" argument is just pointing out that most of his wealth sits in un

Genuine question because I'm out of the loop: it looks to me like the "Bezos doesn't pay taxes" argument is just pointing out that most of his wealth sits in unrealized gains in amazon stock. When he sells stock, he pays taxes. Is there more to it that I'm missing? Is the prevailing argument that we should be paying taxes on unrealized capital gains?

ohgodplsno 5y ago
Bezos doesn't sell stock. What little he does goes into Blue Origin and is written off again. When Bezos needs cash, he just borrows from the bank using his shares as collateral. No taxes.
- nomel 5y ago
  Borrowing mean returning the money at some point. Where does this money come from, and how isn't it taxed?
  - fossuser 5y ago
    Person dies, wealth gets inherited at new cost basis, heirs pay off loans with new (higher) cost basis, tax revenue isn’t collected. At least that’s the model as I understand it.
    - nomel 5y ago
      I assume this means the banks are giving > 40 years loans? Isn't inheritance tax fairly high? A quick search says 40% federal, with around 20% state.
      - fossuser 5y ago
        IIRC estate tax doesn't kick in until after ~$20M? I don't really know much about this particular area of tax law though so I wouldn't rely on my comments.
    - djrogers 5y ago
      > tax revenue isn’t collected. If you completely ignore estate taxes, this would be true.
      - fossuser 5y ago
        Yeah you're probably right - my tax knowledge of this area is not great since I haven't had to care about it. I think that kicks in after $20M?
- arn 5y ago
  This is not true. He realized $4 billion in gains in that ProRepublica article people referenced, and he regular sells shares. https://www.forbes.com/sites/rachelsandler/2021/05/11/jeff-bezos-sells-third-batch-of-amazon-shares-in-a-week/?sh=51be133792c0 https://www.forbes.com/sites/rachelsandler/2021/05/11/jeff-b...
beerandt 5y ago
You or me would sell stock and pay taxes. He borrows against the shares, which keeps his votes while cashing out non-taxable income.
- cowgoesmoo 5y ago
  But wouldn't he need to sell stock eventually to service the loan payments?
  - beerandt 5y ago
    Yeah- but you postpone it indefinitely, or pay it back in a year where you have negative income or other circumstances that afford a better tax situation. Or get sneaky and attempt other "creative" legally questionable solutions, like having an entity you control buy that debt from the bank and hold it while giving you a 0% rate, or something similar.
  - asciimov 5y ago
    Not necessarily. The wealthy put up $-worth of shares as collateral to borrow $$$$-worth of money from the bank at low interest rates. The bank doesn't just sit on those shares, they use them to generate money for themselves. For example, say the Bank takes $250M in Amazon shares from Bezos and loans him $1B. If the bank projects that the price of Amazon is going down, they short that $250M in shares. If Bezos did need to pay off one bank, he just borrows from another.
    - kristjansson 5y ago
      It's the other way around? You borrow substantially fewer dollars than the value of the shares you pledged as collateral so that the bank doesn't call the loan if (when) the value of the shares changes.
      - asciimov 5y ago
        For you and me, you are right, but those on the top get to play by different rules. Also, while it's called a loan, think of it more like a credit line.
fossuser 5y ago
I don't think you're missing anything - the sense I get is that it's primarily a knee-jerk political response. I suspect people like to take cynical negative views of things because it's both easy and a common method of trying to signal wise-ness, rarely is it applied consistently though. Bezos is just extremely visible and people take the positive space stuff as an excuse to 'well, actually' be 'contrarian' and negative. Irony though is this seems to be the mostly conventional political position anyway. https://slatestarcodex.com/2014/08/14/beware-isolated-demands-for-rigor/ https://slatestarcodex.com/2014/08/14/beware-isolated-demand... On the specific tax stuff, you can borrow against holdings and then pass them on when you die (I think people that inherit it get the cost basis 'stepped-up' to whatever level they get it at). This means some of that tax value on gains isn't collected. It's all tied up in unrealized gains for the most part and since it's typically associated with massive non-zero-sum wealth creation - I'm not sure why it matters. If people want to go after inheritance rather than taking wealth from people that actually created it, I suspect there would be a lot more support.
- ironrabbit 5y ago
  Interesting. Resetting cost basis upon inheritance does seem like a massive tax avoidance loophole, I can't quickly think of a reason why this should be allowed. I agree also that this would probably be a popular (and sensible) modification to the tax code.
  - fossuser 5y ago
    Part of me wonders if the same group of people trying to take away the wealth created by others have both not created much of their own and stand to inherit a lot from their parents. I don't know - but I have a hunch that a lot of these voices are often trust fund kids, or kids of wealthy parents. It'd be an interesting paradox if they're suddenly against policy that may affect their inheritance. Currently though inheritance is protected up to fairly extreme monetary amounts (in the US anyway) so the change would have to be fairly dramatic.
okintheory 5y ago
This is my current understanding: Basically, once you're this rich, you can take hundreds of millions or billions of dollars worth of loans to cover anything you'd like to spend. Now, you can make sure that you're actually "losing" money in any given year by having (almost) no realized income. Then, at the end, you die, having never paid taxes. https://www.nytimes.com/2021/06/09/briefing/tax-jeff-bezos-wealthy.html https://www.nytimes.com/2021/06/09/briefing/tax-jeff-bezos-w... https://www.propublica.org/article/the-secret-irs-files-short-form-a-quick-guide-to-what-we-uncovered https://www.propublica.org/article/the-secret-irs-files-shor... EDIT: Yes, this is a big part of why there's now a common argument that unrealized (but very large) capital gains should be taxed.
- JumpCrisscross 5y ago
  > once you're this rich, you can take hundreds of millions or billions of dollars worth of loans to cover anything you'd like to spend Didn’t ProPublica show, in their leaked tax returns, that Bezos doesn’t do this?
- ALittleLight 5y ago
  But you have to repay those loans eventually incurring the tax burden when you do, right?
  - robotresearcher 5y ago
    You die without ever selling your stocks. Your heirs can pay off your loans by selling some of the stocks they inherit. Their cost basis for those stocks is their value at the time of inheritance. This way no capital gains tax is ever due on the stock gains made in your lifetime.
    - djrogers 5y ago
      At the amounts you're talking about (100s of millions of $$), virtually all of that stock would be subject to the federal estate tax, with the vast majority of it at the 40% top rate. Those unrealized gains you're talking about are one of the main reasons the estate tax was enacted ~100yrs ago...
burkaman 5y ago
Well, does it seem like he has realized any gains? The prevailing argument is that as a society we do not have to let one individual amass this much power. It's ok to hold that view without having a deep enough understanding of tax law to know what needs to be changed.
- ironrabbit 5y ago
  I think it's very reasonable to hold that view (I do as well). But to propose a solution, it's necessary to understand the facts of the current situation, which is what I'm trying to learn.
jimbokun 5y ago
If you ask Elizabeth Warren, yes.
anigbrowl 5y ago
From an ethical rather than a legal standpoint, I'd argue that when you use stock as collateral to secure a loan you are in fact realizing a gain. This is a common practice and the stockholders then deduct the coast of loan service from the tax liability that they do incur. It's kind of a racket.

ohgodplsno 5y ago

Bezos doesn't sell stock. What little he does goes into Blue Origin and is written off again. When Bezos needs cash, he just borrows from the bank using his shares as collateral. No taxes.

nomel 5y ago
Borrowing mean returning the money at some point. Where does this money come from, and how isn't it taxed?
- fossuser 5y ago
  Person dies, wealth gets inherited at new cost basis, heirs pay off loans with new (higher) cost basis, tax revenue isn’t collected. At least that’s the model as I understand it.
  - nomel 5y ago
    I assume this means the banks are giving > 40 years loans? Isn't inheritance tax fairly high? A quick search says 40% federal, with around 20% state.
    - fossuser 5y ago
      IIRC estate tax doesn't kick in until after ~$20M? I don't really know much about this particular area of tax law though so I wouldn't rely on my comments.
  - djrogers 5y ago
    > tax revenue isn’t collected. If you completely ignore estate taxes, this would be true.
    - fossuser 5y ago
      Yeah you're probably right - my tax knowledge of this area is not great since I haven't had to care about it. I think that kicks in after $20M?
arn 5y ago
This is not true. He realized $4 billion in gains in that ProRepublica article people referenced, and he regular sells shares. https://www.forbes.com/sites/rachelsandler/2021/05/11/jeff-bezos-sells-third-batch-of-amazon-shares-in-a-week/?sh=51be133792c0 https://www.forbes.com/sites/rachelsandler/2021/05/11/jeff-b...

beerandt 5y ago

You or me would sell stock and pay taxes. He borrows against the shares, which keeps his votes while cashing out non-taxable income.

cowgoesmoo 5y ago
But wouldn't he need to sell stock eventually to service the loan payments?
- beerandt 5y ago
  Yeah- but you postpone it indefinitely, or pay it back in a year where you have negative income or other circumstances that afford a better tax situation. Or get sneaky and attempt other "creative" legally questionable solutions, like having an entity you control buy that debt from the bank and hold it while giving you a 0% rate, or something similar.
- asciimov 5y ago
  Not necessarily. The wealthy put up $-worth of shares as collateral to borrow $$$$-worth of money from the bank at low interest rates. The bank doesn't just sit on those shares, they use them to generate money for themselves. For example, say the Bank takes $250M in Amazon shares from Bezos and loans him $1B. If the bank projects that the price of Amazon is going down, they short that $250M in shares. If Bezos did need to pay off one bank, he just borrows from another.
  - kristjansson 5y ago
    It's the other way around? You borrow substantially fewer dollars than the value of the shares you pledged as collateral so that the bank doesn't call the loan if (when) the value of the shares changes.
    - asciimov 5y ago
      For you and me, you are right, but those on the top get to play by different rules. Also, while it's called a loan, think of it more like a credit line.

fossuser 5y ago

I don't think you're missing anything - the sense I get is that it's primarily a knee-jerk political response. I suspect people like to take cynical negative views of things because it's both easy and a common method of trying to signal wise-ness, rarely is it applied consistently though. Bezos is just extremely visible and people take the positive space stuff as an excuse to 'well, actually' be 'contrarian' and negative. Irony though is this seems to be the mostly conventional political position anyway. https://slatestarcodex.com/2014/08/14/beware-isolated-demands-for-rigor/ https://slatestarcodex.com/2014/08/14/beware-isolated-demand... On the specific tax stuff, you can borrow against holdings and then pass them on when you die (I think people that inherit it get the cost basis 'stepped-up' to whatever level they get it at). This means some of that tax value on gains isn't collected. It's all tied up in unrealized gains for the most part and since it's typically associated with massive non-zero-sum wealth creation - I'm not sure why it matters. If people want to go after inheritance rather than taking wealth from people that actually created it, I suspect there would be a lot more support.

ironrabbit 5y ago
Interesting. Resetting cost basis upon inheritance does seem like a massive tax avoidance loophole, I can't quickly think of a reason why this should be allowed. I agree also that this would probably be a popular (and sensible) modification to the tax code.
- fossuser 5y ago
  Part of me wonders if the same group of people trying to take away the wealth created by others have both not created much of their own and stand to inherit a lot from their parents. I don't know - but I have a hunch that a lot of these voices are often trust fund kids, or kids of wealthy parents. It'd be an interesting paradox if they're suddenly against policy that may affect their inheritance. Currently though inheritance is protected up to fairly extreme monetary amounts (in the US anyway) so the change would have to be fairly dramatic.

okintheory 5y ago

This is my current understanding: Basically, once you're this rich, you can take hundreds of millions or billions of dollars worth of loans to cover anything you'd like to spend. Now, you can make sure that you're actually "losing" money in any given year by having (almost) no realized income. Then, at the end, you die, having never paid taxes. https://www.nytimes.com/2021/06/09/briefing/tax-jeff-bezos-wealthy.html https://www.nytimes.com/2021/06/09/briefing/tax-jeff-bezos-w... https://www.propublica.org/article/the-secret-irs-files-short-form-a-quick-guide-to-what-we-uncovered https://www.propublica.org/article/the-secret-irs-files-shor... EDIT: Yes, this is a big part of why there's now a common argument that unrealized (but very large) capital gains should be taxed.

JumpCrisscross 5y ago
> once you're this rich, you can take hundreds of millions or billions of dollars worth of loans to cover anything you'd like to spend Didn’t ProPublica show, in their leaked tax returns, that Bezos doesn’t do this?
ALittleLight 5y ago
But you have to repay those loans eventually incurring the tax burden when you do, right?
- robotresearcher 5y ago
  You die without ever selling your stocks. Your heirs can pay off your loans by selling some of the stocks they inherit. Their cost basis for those stocks is their value at the time of inheritance. This way no capital gains tax is ever due on the stock gains made in your lifetime.
  - djrogers 5y ago
    At the amounts you're talking about (100s of millions of $$), virtually all of that stock would be subject to the federal estate tax, with the vast majority of it at the 40% top rate. Those unrealized gains you're talking about are one of the main reasons the estate tax was enacted ~100yrs ago...

burkaman 5y ago

Well, does it seem like he has realized any gains? The prevailing argument is that as a society we do not have to let one individual amass this much power. It's ok to hold that view without having a deep enough understanding of tax law to know what needs to be changed.

ironrabbit 5y ago
I think it's very reasonable to hold that view (I do as well). But to propose a solution, it's necessary to understand the facts of the current situation, which is what I'm trying to learn.

jimbokun 5y ago

If you ask Elizabeth Warren, yes.

anigbrowl 5y ago

From an ethical rather than a legal standpoint, I'd argue that when you use stock as collateral to secure a loan you are in fact realizing a gain. This is a common practice and the stockholders then deduct the coast of loan service from the tax liability that they do incur. It's kind of a racket.