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Banks are chartered by the government, thus should be prohibited from giving loans against publicly traded stocks, at least at rates less than the applicable ca

Banks are chartered by the government, thus should be prohibited from giving loans against publicly traded stocks, at least at rates less than the applicable capital gains tax, otherwise these loans are nothing more than government sanctioned tax loopholes for the rich.

georgeecollins 4y ago
This sounds like an interesting point but I don't understand it. Why is it worse to give a loan against a building for less than the capital gains rate then it is to do so for a public stock. Can you explain or link to an explanation? Thank you.
- throwawaycities 4y ago
  Although they are both subject to capital gains taxes there are many differences between real estate and publicly traded stock. As a preliminary matter, as investment vehicles publicly traded stock is a liquid asset, whereas real estate is an illiquid asset. Generally one invests in liquid investments so that they can be readily converted into cash when needed. From the tax perspective a building/building owner would at all times be subject to continue paying property taxes. If there were some equivalent wealth tax for stock holders then at least society wouldn’t lose out entirely on this kind of tax avoidance scheme designed for the rich, but I’d still probably prefer these billions in bank loans go to qualified home buyers before lending it to the world’s richest man to circumvent a taxable event.
eadmund 4y ago
Not really. The loan isn't really income: the borrower gets $X, but is also on the hook for $X plus interest. It costs him money.
- hannasanarion 4y ago
  It doesn't cost him anything, because the interest rate on the loan is virtually guaranteed to be less than the appreciation rate of the underlying asset.
  - bombcar 4y ago
    This has only been true during our surprisingly low interest rate environment over the last 20+ years. It could change rapidly and people can get wiped out quite quickly when it does.
    - hannasanarion 4y ago
      Don't confuse consumer and central interest rates for discretionary loan interest rates. The ultra-rich have been taking out ultra-low interest stock-backed loans to cover their living costs and obligations for over a century, and no billionaire has ever been "wiped out" by interest loan.
  - tofuahdude 4y ago
    That isn't how these mechanisms work from a legal standpoint and ignores many of with-strings-attached realities of this kind of financing. On the flip side, selling the assets would have no strings attached to the cash. Further, it is definitely not guaranteed as you assert.
adolph 4y ago
> at least at rates less than the applicable capital gains tax So if you don't sell the stock and thus have no applicable capital gains tax, then you can be loaned NaN dollars?

georgeecollins 4y ago

This sounds like an interesting point but I don't understand it. Why is it worse to give a loan against a building for less than the capital gains rate then it is to do so for a public stock. Can you explain or link to an explanation? Thank you.

throwawaycities 4y ago
Although they are both subject to capital gains taxes there are many differences between real estate and publicly traded stock. As a preliminary matter, as investment vehicles publicly traded stock is a liquid asset, whereas real estate is an illiquid asset. Generally one invests in liquid investments so that they can be readily converted into cash when needed. From the tax perspective a building/building owner would at all times be subject to continue paying property taxes. If there were some equivalent wealth tax for stock holders then at least society wouldn’t lose out entirely on this kind of tax avoidance scheme designed for the rich, but I’d still probably prefer these billions in bank loans go to qualified home buyers before lending it to the world’s richest man to circumvent a taxable event.

eadmund 4y ago

Not really. The loan isn't really income: the borrower gets $X, but is also on the hook for $X plus interest. It costs him money.

hannasanarion 4y ago
It doesn't cost him anything, because the interest rate on the loan is virtually guaranteed to be less than the appreciation rate of the underlying asset.
- bombcar 4y ago
  This has only been true during our surprisingly low interest rate environment over the last 20+ years. It could change rapidly and people can get wiped out quite quickly when it does.
  - hannasanarion 4y ago
    Don't confuse consumer and central interest rates for discretionary loan interest rates. The ultra-rich have been taking out ultra-low interest stock-backed loans to cover their living costs and obligations for over a century, and no billionaire has ever been "wiped out" by interest loan.
- tofuahdude 4y ago
  That isn't how these mechanisms work from a legal standpoint and ignores many of with-strings-attached realities of this kind of financing. On the flip side, selling the assets would have no strings attached to the cash. Further, it is definitely not guaranteed as you assert.

adolph 4y ago

> at least at rates less than the applicable capital gains tax So if you don't sell the stock and thus have no applicable capital gains tax, then you can be loaned NaN dollars?