5 ms·

But as far as I understand, the stocks, and other difficult to liquidate assets, as log as you hold them in that form, are worth "nothing". You can't go buy bre

But as far as I understand, the stocks, and other difficult to liquidate assets, as log as you hold them in that form, are worth "nothing". You can't go buy bread with that, not even a house. At some point, you need to sell and get your local currency in exchange. That can be considered income, and taxed at that value. It doesn't matter whether you had 1M which melted to 1000 or if you bought it for peanuts and got lucky.

creakingstairs 4y ago
> At some point, you need to sell and get your local currency in exchange. But ultra rich people actually don’t. They can just incur debts using their wealth and use that instead.
- vladvasiliu 4y ago
  But how are those debts paid back?
- sam_lowry_ 4y ago
  So what? If banks will be taxed when selling collateral, debt costs will adjust accordingly and pass on to wealthy still.
  - creakingstairs 4y ago
    So we get to pay 40%+ tax on our income on a yearly basis while they get to pay a mystery amount that may or may not be factored into debt costs that can also be deferred for a while? Yeah that sounds fair.
    - sam_lowry_ 4y ago
      Why misery amount? The government can choose whatever tax it deems appropriate. Also, where I live options on shares are taxed at 10%. The government does not have to wait until they are exercised to take a cut.
      - creakingstairs 4y ago
        Because you said: > debt costs will adjust accordingly and pass on to wealthy still Let’s think about some the factors that may influence this imaginary debt cost: - whether asset is an appreciating asset - risk management strategy of the bank - whether account manager wants to have competitive terms so that the wealthy customer won’t find a better deal And so on. How is this not a mystery cost? Sure the bank in some distant future might some tax when it decides to liquidate it. But by that time, the assets would have been in pools for such a long time that we’d never know exactly how much “tax” was paid. I’m not going to say I know the solution to this problem because I honestly don’t think there is a way to fix this. Tax avoidance will always be there.
- sam_lowry_ 4y ago
  >But how are those debts paid back? They do not have to be. For instance, it is common to never completely pay off the mortgage in Switzerland to avoid one-off taxation. Instead, the eventual taxes are included in the cost of the debt.
  - maccard 4y ago
    There's a difference between never paying it back fully, and never paying it back _at all_.
    - brianwawok 4y ago
      Interest only mortgage exists in the US. You never pay principle.
      - maccard 4y ago
        An interest only loan doesn't suddenly mean there's no repayments. The hint is in the name, you still have to repeat the interest on the loan. Payment terms may vary but if you think that banks across the US are sitting on interest only, asset backed mortgages for the ultra wealthy's most expensive purchases, and taking no payment from them then I don't think we're going to be able to come to an agreement on this topic.
maccard 4y ago
> you need to sell and get your local currency in exchange. This isn't exactly true. For things like bread, yes it _is_ true, nobody will let you take out an asset backed loan. For someone with significant assets, large purchases can be funded by asset backed loan. These are available from high street banks, e.g. [0]. > That can be considered income No, here's where you're wrong. It's considered capital gains and you're taxed on the difference between what you liquated the asset for, and the value of the asset when you were given it. Here in the UK, capital gains rates are tied to your income level, so if you make under £50,000/year you will pay 10% capital gains, or 20% if you make more. In the US the bands are similar (0, 15, 20%), but I'm not sure how they're calculated sorry. If we ignore the lowest band of income tax for comparison purposes, someone who makes 1 million in salary here in the UK will pay 45% roughly of that in tax. Someone who makes it all in capital gains will pay 10% [0] https://www.wellsfargo.com/cib/institutional-investing/asset-backed-finance/ https://www.wellsfargo.com/cib/institutional-investing/asset...
- vladvasiliu 4y ago
  That's how it works in France, too. But my point is that maybe this could be changed to be more in tune with income taxes. In France, however, they have instituted a "flat tax" at 30% on capital gains. Before, it was taxed as income after an abatement. So changes can be made, they just did it the wrong way.
harriet1 4y ago
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creakingstairs 4y ago

> At some point, you need to sell and get your local currency in exchange. But ultra rich people actually don’t. They can just incur debts using their wealth and use that instead.

vladvasiliu 4y ago
But how are those debts paid back?
sam_lowry_ 4y ago
So what? If banks will be taxed when selling collateral, debt costs will adjust accordingly and pass on to wealthy still.
- creakingstairs 4y ago
  So we get to pay 40%+ tax on our income on a yearly basis while they get to pay a mystery amount that may or may not be factored into debt costs that can also be deferred for a while? Yeah that sounds fair.
  - sam_lowry_ 4y ago
    Why misery amount? The government can choose whatever tax it deems appropriate. Also, where I live options on shares are taxed at 10%. The government does not have to wait until they are exercised to take a cut.
    - creakingstairs 4y ago
      Because you said: > debt costs will adjust accordingly and pass on to wealthy still Let’s think about some the factors that may influence this imaginary debt cost: - whether asset is an appreciating asset - risk management strategy of the bank - whether account manager wants to have competitive terms so that the wealthy customer won’t find a better deal And so on. How is this not a mystery cost? Sure the bank in some distant future might some tax when it decides to liquidate it. But by that time, the assets would have been in pools for such a long time that we’d never know exactly how much “tax” was paid. I’m not going to say I know the solution to this problem because I honestly don’t think there is a way to fix this. Tax avoidance will always be there.
sam_lowry_ 4y ago
>But how are those debts paid back? They do not have to be. For instance, it is common to never completely pay off the mortgage in Switzerland to avoid one-off taxation. Instead, the eventual taxes are included in the cost of the debt.
- maccard 4y ago
  There's a difference between never paying it back fully, and never paying it back _at all_.
  - brianwawok 4y ago
    Interest only mortgage exists in the US. You never pay principle.
    - maccard 4y ago
      An interest only loan doesn't suddenly mean there's no repayments. The hint is in the name, you still have to repeat the interest on the loan. Payment terms may vary but if you think that banks across the US are sitting on interest only, asset backed mortgages for the ultra wealthy's most expensive purchases, and taking no payment from them then I don't think we're going to be able to come to an agreement on this topic.

maccard 4y ago

> you need to sell and get your local currency in exchange. This isn't exactly true. For things like bread, yes it _is_ true, nobody will let you take out an asset backed loan. For someone with significant assets, large purchases can be funded by asset backed loan. These are available from high street banks, e.g. [0]. > That can be considered income No, here's where you're wrong. It's considered capital gains and you're taxed on the difference between what you liquated the asset for, and the value of the asset when you were given it. Here in the UK, capital gains rates are tied to your income level, so if you make under £50,000/year you will pay 10% capital gains, or 20% if you make more. In the US the bands are similar (0, 15, 20%), but I'm not sure how they're calculated sorry. If we ignore the lowest band of income tax for comparison purposes, someone who makes 1 million in salary here in the UK will pay 45% roughly of that in tax. Someone who makes it all in capital gains will pay 10% [0] https://www.wellsfargo.com/cib/institutional-investing/asset-backed-finance/ https://www.wellsfargo.com/cib/institutional-investing/asset...

vladvasiliu 4y ago
That's how it works in France, too. But my point is that maybe this could be changed to be more in tune with income taxes. In France, however, they have instituted a "flat tax" at 30% on capital gains. Before, it was taxed as income after an abatement. So changes can be made, they just did it the wrong way.

harriet1 4y ago

[dead]