4 ms·

(Probably a bit late to the conversation but whatever) > You have gained income from your capital at this point. Let’s say Jeff Bezos wants to buy a yacht. He

(Probably a bit late to the conversation but whatever) > You have gained income from your capital at this point. Let’s say Jeff Bezos wants to buy a yacht. He has 1 million amazon shares worth 1 cent when he started and now worth 100 dollars. So he can sell the shares to get 100 million dollars and buy the yacht. But he has to pay 10% capital gains. Or he can borrow 100 million from any bank and they will accept the shares as collateral. He does not pay capital gains at this point My take on this is that is a freely entered into contract at which Bezos values his shares at 100 million. And he gains use of the wealth of 100Million (debt balance is not relevant here) Think of it as like the Duke of SomethingShire. He can rent out his land to farmers etc and get an income. That’s fine. But if he then borrows a 100 million against the land of the shire, and buys a yacht with it, then he has gained from a chnage of the capital - I just don’t see this as a private shielded from tax decision. I think there is a further issue in that Amazonnshares do not generate much income (not much in way of dividends). This leads to the general problem of tech shares in that it’s always a greater fool valuation. But warren buffet talks much better about dangers of valuing shares without income streams than I do.

eadmund 2y ago
> Or he can borrow 100 million from any bank and they will accept the shares as collateral. He does not pay capital gains at this point Nope, but when he does sell those shares, he will (except for the step-up in basis rule on death). And he has to make payments on the loan, which has to come either from income (which is taxed), sales of capital (which is taxed) or other loans (which will then be paid off with money which will ultimately be taxed in some way). Remember that the loan is a liability. The only issue here is the step-up in basis. Everyone gets distracted by the big loan, but ignores the actual step where taxes can be avoided. If we eliminate the step-up in basis then there is no non-taxable issue.
- lifeisstillgood 2y ago
  If I understand “step up in basis” this is where Jeff Bezos never sells his shares, dies and leaves his shares to his son for example. The (US) tax law then “steps up” the value of shares - so instead of saying the shares were orignally worth 1 cent each and now with 100 dollars each, they are treated as being worth 100 dollars when the son gets them and so he has to pay no capital gains. I think I over simplify. And you suggest eliminating that is a good idea. I agree - but suggest we don’t have to wait till Jeff dies - there are other taxable “liquidity events” that are freely entered into and do not rely on third party valuations, and that achieve the goal of (the Modern Monetary Theory goal) of taxing and so eliminating money. And yes the loan is a liability - but under current tax law (which is some version of buy, borrow, die) the wealth remains untaxed or under-taxed, kind of defeating the point of governments printing the money. In short we want wealth to circulate not congregate.

eadmund 2y ago

> Or he can borrow 100 million from any bank and they will accept the shares as collateral. He does not pay capital gains at this point Nope, but when he does sell those shares, he will (except for the step-up in basis rule on death). And he has to make payments on the loan, which has to come either from income (which is taxed), sales of capital (which is taxed) or other loans (which will then be paid off with money which will ultimately be taxed in some way). Remember that the loan is a liability. The only issue here is the step-up in basis. Everyone gets distracted by the big loan, but ignores the actual step where taxes can be avoided. If we eliminate the step-up in basis then there is no non-taxable issue.

lifeisstillgood 2y ago
If I understand “step up in basis” this is where Jeff Bezos never sells his shares, dies and leaves his shares to his son for example. The (US) tax law then “steps up” the value of shares - so instead of saying the shares were orignally worth 1 cent each and now with 100 dollars each, they are treated as being worth 100 dollars when the son gets them and so he has to pay no capital gains. I think I over simplify. And you suggest eliminating that is a good idea. I agree - but suggest we don’t have to wait till Jeff dies - there are other taxable “liquidity events” that are freely entered into and do not rely on third party valuations, and that achieve the goal of (the Modern Monetary Theory goal) of taxing and so eliminating money. And yes the loan is a liability - but under current tax law (which is some version of buy, borrow, die) the wealth remains untaxed or under-taxed, kind of defeating the point of governments printing the money. In short we want wealth to circulate not congregate.