4 ms·

It's not that tricky. All you have to do is make it a taxable event to collateralize stock.

by arrosenberg 1y ago

phkahler 1y ago
How? That makes little sense to me from an implementation standpoint.
- NewJazz 1y ago
  Lenders would have to report loan origination for secured loans where some specific asset classes are acting as the collateral.
- _DeadFred_ 1y ago
  If I get something of worth, non-related to the stock/ownership, for the current value on my stock/ownership, I should pay taxes on that amount. I am using the stocks value to gain something. If I take out a loan for businesses needs, that is in the interest of the thing I own. If I take out a loan to buy a separate thing, I have leveraged the current value and have therefor realized the current value and should pay accordingly.
- arrosenberg 1y ago
  When I bought my home I had to sell $XXX,XXX of stock to make the down payment. If Jeff Bezos wants to buy the same house, he would use a line of credit from the bank, collateralized by his Amazon shares (or whatever source of wealth) and pay with that. I paid 15% in long-term capital gains, he pays 0%. Under my plan, he would pay 15% LTCG for collateralizing his stock,. If I had to pay it, then it's entirely fair and reasonable that we expect him to pay his fair share too.
  - RhysU 1y ago
    You could have done the same thing with a margin-enabled brokerage account, e.g. Interactive Brokers or Fidelity. It's not particularly hard. Just have enough collateral to not get margin called. And, like the margin interest rate better than the tax hit. Shop around for rates. Notice, you don't have to pay the entire down payment this way. If you have amassed 6 figures of stock and are buying a house, you're qualified to educate yourself on these topics. It's usually worth reading up anytime you incur that sizable a taxable event. I am not saying this is a great idea, BTW. Just, it's an idea within many people's reach.
    - arrosenberg 1y ago
      If it's a bad idea, it's a bad faith argument - why would you suggest it? The tax laws shouldn't favor the gross accumulation of wealth, nor the starvation of the treasury, so the laws need to change to force the rich to pay their fair share.
      - fn-mote 1y ago
        > If it's a bad idea, it's a bad faith argument I believe the GP is just cautioning rando HN readers that they should not rush out and make their down payment in the manner described, as opposed to liquidating some of their stock options for "real cash" like the GGP had to do. They are just explaining a reasonable method that the (above) average HN reader could use to be in the same situation as Bezos of having a 0% tax on their down payment. In the US, there's a pretty massive exemption (well, deferral) for capital gains tax on the sale of a primary residence, so once you have one home to work with, the down payment is (kind of?) tax-free anyway.
        arrosenberg 1y ago
        They definitely shouldn't. It's absurd to suggest that because a middle-class homebuyer can get a margin loan through iBroker means that we should let the richest people in history dodge taxes in this way. If no one would actually do that, then it really doesn't matter that they technically can. The obvious solution is to take away the privilege from the wealthy and make them abide the same rules as the rest of us.
        deleted 1y ago
        [deleted]
        deleted 1y ago
        [deleted]
        RhysU 1y ago
        > They definitely shouldn't. Never give absolute financial advice to anyone who's situation you don't fully understand.
twoodfin 1y ago
Should we similarly tax collateralizing real estate as in home equity loans?
- arrosenberg 1y ago
  Sure, if you exclude primary residence. We aren't trying to fuck with the middle class, just the uberwealthy. I'd be fine with only taxing collateralized stock on people with over $20M in net worth too. We just don't need to provide tax breaks to the rich to make them more rich.
  - RhysU 1y ago
    Now, rigorously define "net worth".
    - arrosenberg 1y ago
      It's such an odd argument - the wealthy always seem to know what their net worth is. We could just make them declare it. If they lie, straight to jail.
      - selcuka 1y ago
        > If they lie, straight to jail. How do we know whether they lie without a solid definition of net worth? I'm not defending billionaires and I believe they should be heavily taxed, and huge inheritances should be outlawed, but what's Elon Musk's net worth, for example? He surely doesn't have $369 billion in cash. Can we tax him based on his Tesla shares? What happens if Tesla stock goes down by 99% next year? It's tricky.
        arrosenberg 1y ago
        > How do we know whether they lie without a solid definition of net worth? They get to tell us what they are worth. Generally speaking, if you want to lie about your net worth you are choosing between tax fraud and insurance fraud. There are some areas that are tricky, like pre-market startups, but we have things like 409A valuations that help with that. Penalties should have no statute of limitations - if you lie about it, you get to look over your shoulder forever. It's not perfect, but as you have clearly recognized, there is no perfect system that allows for a reasonable degree of freedom. > Can we tax him based on his Tesla shares? What happens if Tesla stock goes down by 99% next year? Not really tricky! He gets taxed on the value of his shares in year 1 and he gets taxed on the value of the shares in year 2. If the value goes down 99%, you pay way less tax (or none if he's no longer wealthy enough to qualify). He can sell his shares to pay it, and I honestly do not care if he is not liquid enough to do that - that's a situation he put himself into. No he doesn't get a tax break on the loss - the rich have a sense of entitlement that their wealth belongs to them free of charge, and I think they should have to pay maintenance. Without public utilities (roads, electricity, air and sea traffic control, etc) and social stability, most of these billionaires would lose their wealth to warlords very quickly.

It's not that tricky. All you have to do is make it a taxable event to collateralize stock.

phkahler 1y ago

How? That makes little sense to me from an implementation standpoint.

NewJazz 1y ago
Lenders would have to report loan origination for secured loans where some specific asset classes are acting as the collateral.
_DeadFred_ 1y ago
If I get something of worth, non-related to the stock/ownership, for the current value on my stock/ownership, I should pay taxes on that amount. I am using the stocks value to gain something. If I take out a loan for businesses needs, that is in the interest of the thing I own. If I take out a loan to buy a separate thing, I have leveraged the current value and have therefor realized the current value and should pay accordingly.
arrosenberg 1y ago
When I bought my home I had to sell $XXX,XXX of stock to make the down payment. If Jeff Bezos wants to buy the same house, he would use a line of credit from the bank, collateralized by his Amazon shares (or whatever source of wealth) and pay with that. I paid 15% in long-term capital gains, he pays 0%. Under my plan, he would pay 15% LTCG for collateralizing his stock,. If I had to pay it, then it's entirely fair and reasonable that we expect him to pay his fair share too.
- RhysU 1y ago
  You could have done the same thing with a margin-enabled brokerage account, e.g. Interactive Brokers or Fidelity. It's not particularly hard. Just have enough collateral to not get margin called. And, like the margin interest rate better than the tax hit. Shop around for rates. Notice, you don't have to pay the entire down payment this way. If you have amassed 6 figures of stock and are buying a house, you're qualified to educate yourself on these topics. It's usually worth reading up anytime you incur that sizable a taxable event. I am not saying this is a great idea, BTW. Just, it's an idea within many people's reach.
  - arrosenberg 1y ago
    If it's a bad idea, it's a bad faith argument - why would you suggest it? The tax laws shouldn't favor the gross accumulation of wealth, nor the starvation of the treasury, so the laws need to change to force the rich to pay their fair share.
    - fn-mote 1y ago
      > If it's a bad idea, it's a bad faith argument I believe the GP is just cautioning rando HN readers that they should not rush out and make their down payment in the manner described, as opposed to liquidating some of their stock options for "real cash" like the GGP had to do. They are just explaining a reasonable method that the (above) average HN reader could use to be in the same situation as Bezos of having a 0% tax on their down payment. In the US, there's a pretty massive exemption (well, deferral) for capital gains tax on the sale of a primary residence, so once you have one home to work with, the down payment is (kind of?) tax-free anyway.
      - arrosenberg 1y ago
        They definitely shouldn't. It's absurd to suggest that because a middle-class homebuyer can get a margin loan through iBroker means that we should let the richest people in history dodge taxes in this way. If no one would actually do that, then it really doesn't matter that they technically can. The obvious solution is to take away the privilege from the wealthy and make them abide the same rules as the rest of us.
        deleted 1y ago
        [deleted]
        deleted 1y ago
        [deleted]
        RhysU 1y ago
        > They definitely shouldn't. Never give absolute financial advice to anyone who's situation you don't fully understand.

twoodfin 1y ago

Should we similarly tax collateralizing real estate as in home equity loans?

arrosenberg 1y ago
Sure, if you exclude primary residence. We aren't trying to fuck with the middle class, just the uberwealthy. I'd be fine with only taxing collateralized stock on people with over $20M in net worth too. We just don't need to provide tax breaks to the rich to make them more rich.
- RhysU 1y ago
  Now, rigorously define "net worth".
  - arrosenberg 1y ago
    It's such an odd argument - the wealthy always seem to know what their net worth is. We could just make them declare it. If they lie, straight to jail.
    - selcuka 1y ago
      > If they lie, straight to jail. How do we know whether they lie without a solid definition of net worth? I'm not defending billionaires and I believe they should be heavily taxed, and huge inheritances should be outlawed, but what's Elon Musk's net worth, for example? He surely doesn't have $369 billion in cash. Can we tax him based on his Tesla shares? What happens if Tesla stock goes down by 99% next year? It's tricky.
      - arrosenberg 1y ago
        > How do we know whether they lie without a solid definition of net worth? They get to tell us what they are worth. Generally speaking, if you want to lie about your net worth you are choosing between tax fraud and insurance fraud. There are some areas that are tricky, like pre-market startups, but we have things like 409A valuations that help with that. Penalties should have no statute of limitations - if you lie about it, you get to look over your shoulder forever. It's not perfect, but as you have clearly recognized, there is no perfect system that allows for a reasonable degree of freedom. > Can we tax him based on his Tesla shares? What happens if Tesla stock goes down by 99% next year? Not really tricky! He gets taxed on the value of his shares in year 1 and he gets taxed on the value of the shares in year 2. If the value goes down 99%, you pay way less tax (or none if he's no longer wealthy enough to qualify). He can sell his shares to pay it, and I honestly do not care if he is not liquid enough to do that - that's a situation he put himself into. No he doesn't get a tax break on the loss - the rich have a sense of entitlement that their wealth belongs to them free of charge, and I think they should have to pay maintenance. Without public utilities (roads, electricity, air and sea traffic control, etc) and social stability, most of these billionaires would lose their wealth to warlords very quickly.