6 ms·

How American billionaires pass wealth to heirs tax-free

56 points by elsewhen 5y ago

web2sucks 5y ago
Let’s not forget that when the US governments prints money, it increases asset prices across the board. The government would then tax those “gains”. The problem is that those aren’t gains, they are only keeping up with inflation.
- NaturalPhallacy 5y ago
  The government prints very little money. 90% of USD doesn't physically exist according to the fed itself. Inflation comes from banks creating money by fractional reserve lending.
mlindner 5y ago
This misinformation spree of the last few years is really worrying. A wealth tax would be completely disastrous to the US economy. It would cause shares to be a depreciating asset and cause mass selloffs. The rich would still get around them by shoving all share ownership into another corporation that is off-shored into a tax haven country. And no "it's only for the rich" is not a valid argument. Once it's in place it will gradually be expanded downward. (It's exactly how the income tax started.) It will act as yet another wall for the middle class getting into share ownership and preventing retail investors from getting into the market. Politicians and media are also doing things like renaming the wealth tax a "unrealized capital gains tax" to disguise what it really is to mislead the public. Edit: If anything I want to solve wealth inequality (or at least the perception of wealth inequality) so that draconian politicians don't propose draconian laws that would ruin the economy.
- danny_codes 5y ago
  What would your solution to rising wealth inequality be? Or perhaps you don't think there's a problem?
  - mlindner 5y ago
    This isn't even a solution to wealth inequality so I think your question isn't relevant. Wealth inequality is a complex problem and you can't fix it by just taxing people more. To actually answer your question, I don't have a solution, but I also don't think the problem is as bad as people make it out to be. For this article's specific case I'd just patch the simple hole that you can't skip taxes by passing your shares on after you die. As long as the tax basis date isn't reset on inheritance, everything still works. Someone will pay the taxes eventually. It's an easy change and doesn't really change anything for the lives of most people and it makes more rational sense that way. It's basically fixing a bug in the current law.
    - danny_codes 5y ago
      > This isn't even a solution to wealth inequality so I think your question isn't relevant. Wealth inequality is a complex problem and you can't fix it by just taxing people more. Why not? Redistributive wealth tax seems like a reasonable way to accomplish this, along with raising marginal tax rates, closing tax loopholes, and a 100% inheritance tax. Use the excess money for direct investment in material infrastructure, social benefits, and (most importantly) education, and I would imagine the wealth distribution would look quite different in 20 years. We design the economic system we live in. We can change it any time. Capitalism is a human invention: we create the rules to the game. This isn't some law of physics or some truth of the universe.
  - beamatronic 5y ago
    $15/hour federal minimum wage to start, combined with Medicare for all, funded via cuts to the military budget.
    - mlindner 5y ago
      More of the US budget already goes to medical care and social services than military. The problem is how inefficiently it's used.
      - 5y ago
- influx 5y ago
  So many people claim Jeff Bezos and Elon Musk pay no taxes yet the leaks from the irs show that Musk paid $455 million from 2014-18 and Bezos paid 973 million in the same time.
  - rvnx 5y ago
    Wow that's almost 0.02% of effective tax rate @ 80 million USD per year!
    - verdverm 5y ago
      You are conflating rise in stock price vs actual income.
  - danny_codes 5y ago
    Hmm 250 million a year from Bezos. Who made something like $50 billion in that time-frame. Can I get the 2% tax rate too, or is it just for Bezos?
    - unmole 5y ago
      > Hmm 250 million a year from Bezos. Who made something like $50 billion in that time-frame. Except fot the fact that he didn't make $50 billion.
      - danny_codes 5y ago
        IMO this kind of thinking is narrow-minded. Americans seem very opposed to taxing wealth for some reason. I believe it's a fear of change mostly, or perhaps an irrationally strong belief in some narrow school of economic thought. Even if you are fully indoctrinated though and are ideologically opposed to a wealth tax, perhaps you can recognize the insanity of capital gains tax, whereby Bezos (upon selling his shares) pays just 15%.
        unmole 5y ago
        The top federal tax rate on long-term capital gains is 23.8%. I'm not sure where your 15% comes from. Calculation of capital gains does not account for inflation. Taxing a nominal increase in value over multiple years at the same level as income makes no sense. I resent the implication that I am indoctrinated in some parochial ideology. Especially considering I'm not even American.
- collias 5y ago
  This insanity stems from the media misleading the public into thinking people like Musk (for example) actually have hundreds of billions in cash. He doesn't. What he has is Tesla stock, which the public is welcome to buy as well. If you bought say $5000 of TSLA 3 years ago, that would now be worth nearly $100,000. The media will try to tell the uninformed that you've made a ton of money, and "have paid no taxes". But you haven't made a ton of money, you still just have TSLA shares. As soon as you convert them to USD you have to pay tax on the gains like everyone else.
  - toomuchtodo 5y ago
    If you can borrow against it, you can tax the loan proceeds. It just moves the tax realization to when you receive liquidity for the asset versus a bonafide transfer, closing a loophole. Pay the loan back whenever you want. https://financialpost.com/personal-finance/high-net-worth/elon-musk-short-on-cash-keeps-borrowing-more-and-more-money-even-as-tesla-stock-surges https://financialpost.com/personal-finance/high-net-worth/el... (“Elon Musk, short on cash, keeps borrowing more and more money even as Tesla stock surges; Musk has US$548 million in personal loans from Morgan Stanley, Goldman Sachs and Bank of America, an increase of 8 per cent since May”
    - collias 5y ago
      I mean...yeah. Normal people do exactly this every month with credit cards, mortgages, etc. Should you pay a tax on your mortgage loan amount?
      - toomuchtodo 5y ago
        Maybe? Depends on your net worth and your income. If the rules aren’t getting the desired results, you change the rules. Clearly (imho) the existence of billionaires demonstrates a deficiency in public policy and tax statute.
        AnimalMuppet 5y ago
        I don't think "there should be no billionaires" is a good starting point for deriving tax policy. I especially don't think it's good to have that as an undebated starting point.
- lg 5y ago
  The article is about the estate tax, not an annual wealth tax, and loopholes to work around it ultimately taking advantage of lower tax rates on capital gains than on estates (not to mention wages) and deductions for "charitable" donation. You don't need new taxes on the wealthy to close these loopholes, you just need to eliminate them: charity is a nice thing you can do with your after-tax income, and all income should be taxed on the same progressive schedule.
chmod600 5y ago
I'm not concerned about wealth. I'm concerned with consumption. If you have a billion in stock but live a humble life, what's the point in taxing it? You'll live the same way, and sell some stock. But selling stock to pay taxes is not necessarily good, unless whatever the government does with the money is better than whatever the company was going to do. Sure, it could be good, but it's not a slam dunk. The idea of wealth is just very different in the modern world. If wealthy people were hoarding (keeping a bunch of stuff without using it), then taxing would put that stuff back to use. But wealthy people hold onto money-producing assets, which means someone is still using the stuff. Not always, but often. So it means that taxing it just takes it from one use (say, by a corporation) and puts it to another use (maybe a government use). I'd much prefer that we tax consumption. It could be a 1000% tax for a Ferrari. Encourages better use of stuff and can be very progressive without triggering as much anger.
- bobbytit 5y ago
  Rich and greedy cunts love consumption taxes. They hurt the poor which warms the cockles of their hearts.
  - dang 5y ago
    We've banned this account for breaking the site guidelines. Please don't create accounts to do that with. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html
  - mac01021 5y ago
    Even extremely progressive consumption taxes?
    - bobbytit 5y ago
      Extremely progressive means forcing the poor to bend to your will through punitive taxes. Tobacco, meat, heating and cooling, car and plane travel etc
nunez 5y ago
tl;dr: margin loans against their portfolios which are interest-only indefinitely and don't require the shares therein to be sold unless their cumulative value is worth less than the loan "regular" people do similar financial engineering all the time with home equity lines of credit (i.e. taking out loans against the equity in your house). instead of passing down fat portfolios, they pass down real estate (which is becoming increasingly expensive)

56 points by elsewhen 5y ago

Let’s not forget that when the US governments prints money, it increases asset prices across the board. The government would then tax those “gains”. The problem is that those aren’t gains, they are only keeping up with inflation.

NaturalPhallacy 5y ago
The government prints very little money. 90% of USD doesn't physically exist according to the fed itself. Inflation comes from banks creating money by fractional reserve lending.

mlindner 5y ago

This misinformation spree of the last few years is really worrying. A wealth tax would be completely disastrous to the US economy. It would cause shares to be a depreciating asset and cause mass selloffs. The rich would still get around them by shoving all share ownership into another corporation that is off-shored into a tax haven country. And no "it's only for the rich" is not a valid argument. Once it's in place it will gradually be expanded downward. (It's exactly how the income tax started.) It will act as yet another wall for the middle class getting into share ownership and preventing retail investors from getting into the market. Politicians and media are also doing things like renaming the wealth tax a "unrealized capital gains tax" to disguise what it really is to mislead the public. Edit: If anything I want to solve wealth inequality (or at least the perception of wealth inequality) so that draconian politicians don't propose draconian laws that would ruin the economy.

danny_codes 5y ago
What would your solution to rising wealth inequality be? Or perhaps you don't think there's a problem?
- mlindner 5y ago
  This isn't even a solution to wealth inequality so I think your question isn't relevant. Wealth inequality is a complex problem and you can't fix it by just taxing people more. To actually answer your question, I don't have a solution, but I also don't think the problem is as bad as people make it out to be. For this article's specific case I'd just patch the simple hole that you can't skip taxes by passing your shares on after you die. As long as the tax basis date isn't reset on inheritance, everything still works. Someone will pay the taxes eventually. It's an easy change and doesn't really change anything for the lives of most people and it makes more rational sense that way. It's basically fixing a bug in the current law.
  - danny_codes 5y ago
    > This isn't even a solution to wealth inequality so I think your question isn't relevant. Wealth inequality is a complex problem and you can't fix it by just taxing people more. Why not? Redistributive wealth tax seems like a reasonable way to accomplish this, along with raising marginal tax rates, closing tax loopholes, and a 100% inheritance tax. Use the excess money for direct investment in material infrastructure, social benefits, and (most importantly) education, and I would imagine the wealth distribution would look quite different in 20 years. We design the economic system we live in. We can change it any time. Capitalism is a human invention: we create the rules to the game. This isn't some law of physics or some truth of the universe.
- beamatronic 5y ago
  $15/hour federal minimum wage to start, combined with Medicare for all, funded via cuts to the military budget.
  - mlindner 5y ago
    More of the US budget already goes to medical care and social services than military. The problem is how inefficiently it's used.
    - 5y ago
influx 5y ago
So many people claim Jeff Bezos and Elon Musk pay no taxes yet the leaks from the irs show that Musk paid $455 million from 2014-18 and Bezos paid 973 million in the same time.
- rvnx 5y ago
  Wow that's almost 0.02% of effective tax rate @ 80 million USD per year!
  - verdverm 5y ago
    You are conflating rise in stock price vs actual income.
- danny_codes 5y ago
  Hmm 250 million a year from Bezos. Who made something like $50 billion in that time-frame. Can I get the 2% tax rate too, or is it just for Bezos?
  - unmole 5y ago
    > Hmm 250 million a year from Bezos. Who made something like $50 billion in that time-frame. Except fot the fact that he didn't make $50 billion.
    - danny_codes 5y ago
      IMO this kind of thinking is narrow-minded. Americans seem very opposed to taxing wealth for some reason. I believe it's a fear of change mostly, or perhaps an irrationally strong belief in some narrow school of economic thought. Even if you are fully indoctrinated though and are ideologically opposed to a wealth tax, perhaps you can recognize the insanity of capital gains tax, whereby Bezos (upon selling his shares) pays just 15%.
      - unmole 5y ago
        The top federal tax rate on long-term capital gains is 23.8%. I'm not sure where your 15% comes from. Calculation of capital gains does not account for inflation. Taxing a nominal increase in value over multiple years at the same level as income makes no sense. I resent the implication that I am indoctrinated in some parochial ideology. Especially considering I'm not even American.
collias 5y ago
This insanity stems from the media misleading the public into thinking people like Musk (for example) actually have hundreds of billions in cash. He doesn't. What he has is Tesla stock, which the public is welcome to buy as well. If you bought say $5000 of TSLA 3 years ago, that would now be worth nearly $100,000. The media will try to tell the uninformed that you've made a ton of money, and "have paid no taxes". But you haven't made a ton of money, you still just have TSLA shares. As soon as you convert them to USD you have to pay tax on the gains like everyone else.
- toomuchtodo 5y ago
  If you can borrow against it, you can tax the loan proceeds. It just moves the tax realization to when you receive liquidity for the asset versus a bonafide transfer, closing a loophole. Pay the loan back whenever you want. https://financialpost.com/personal-finance/high-net-worth/elon-musk-short-on-cash-keeps-borrowing-more-and-more-money-even-as-tesla-stock-surges https://financialpost.com/personal-finance/high-net-worth/el... (“Elon Musk, short on cash, keeps borrowing more and more money even as Tesla stock surges; Musk has US$548 million in personal loans from Morgan Stanley, Goldman Sachs and Bank of America, an increase of 8 per cent since May”
  - collias 5y ago
    I mean...yeah. Normal people do exactly this every month with credit cards, mortgages, etc. Should you pay a tax on your mortgage loan amount?
    - toomuchtodo 5y ago
      Maybe? Depends on your net worth and your income. If the rules aren’t getting the desired results, you change the rules. Clearly (imho) the existence of billionaires demonstrates a deficiency in public policy and tax statute.
      - AnimalMuppet 5y ago
        I don't think "there should be no billionaires" is a good starting point for deriving tax policy. I especially don't think it's good to have that as an undebated starting point.
lg 5y ago
The article is about the estate tax, not an annual wealth tax, and loopholes to work around it ultimately taking advantage of lower tax rates on capital gains than on estates (not to mention wages) and deductions for "charitable" donation. You don't need new taxes on the wealthy to close these loopholes, you just need to eliminate them: charity is a nice thing you can do with your after-tax income, and all income should be taxed on the same progressive schedule.

chmod600 5y ago

I'm not concerned about wealth. I'm concerned with consumption. If you have a billion in stock but live a humble life, what's the point in taxing it? You'll live the same way, and sell some stock. But selling stock to pay taxes is not necessarily good, unless whatever the government does with the money is better than whatever the company was going to do. Sure, it could be good, but it's not a slam dunk. The idea of wealth is just very different in the modern world. If wealthy people were hoarding (keeping a bunch of stuff without using it), then taxing would put that stuff back to use. But wealthy people hold onto money-producing assets, which means someone is still using the stuff. Not always, but often. So it means that taxing it just takes it from one use (say, by a corporation) and puts it to another use (maybe a government use). I'd much prefer that we tax consumption. It could be a 1000% tax for a Ferrari. Encourages better use of stuff and can be very progressive without triggering as much anger.

bobbytit 5y ago
Rich and greedy cunts love consumption taxes. They hurt the poor which warms the cockles of their hearts.
- dang 5y ago
  We've banned this account for breaking the site guidelines. Please don't create accounts to do that with. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html
- mac01021 5y ago
  Even extremely progressive consumption taxes?
  - bobbytit 5y ago
    Extremely progressive means forcing the poor to bend to your will through punitive taxes. Tobacco, meat, heating and cooling, car and plane travel etc

nunez 5y ago

tl;dr: margin loans against their portfolios which are interest-only indefinitely and don't require the shares therein to be sold unless their cumulative value is worth less than the loan "regular" people do similar financial engineering all the time with home equity lines of credit (i.e. taking out loans against the equity in your house). instead of passing down fat portfolios, they pass down real estate (which is becoming increasingly expensive)