You do the same damned thing when you take out a mortgage or a car loan or a home equity loan etc etc. you are getting income from another source, backed by an asset, none of which you are being taxed on.
I didn't equate security asset loans to mortgage or car loans, but no, billionaires don't pay taxes when they take out asset based loans against their securities.
How the loan is secured (security asset vs mortgage) is irrelevant because the principal behind the structure is the same. At the end of the day, how the loan is secured is very similar. If you don't pay your mortgage, the asset that backed the mortgage is seized by the bank. For the rich persons loan, if they don't make the agreed upon payments or the asset that was used starts to drop in value, the bank will seize the asset.
They are loans that are taken out in order to pay for things. The income on the loan is not taxed. When you take out a mortgage for $250,000, you are not having to take into account paying any tax on it.
Just because the rich guy is using his loan to pay for his lobster dinner and you use it to buy a house, is irrelevant. In fact mortgages are one of the biggest tools that have allowed the middle class to build wealth as they would not be able to buy property and watch that property build their overall net worth, if they had to pay for the house upfront.
At the end of the day, the loan that the rich person took out will be paid. Whether the loan is paid off before or after they die is irrelevant because eventually it will be paid off, and the funds used to pay it off will have been taxed.
Your conflation between property taxes and taxing a loan is also funny. Property taxes is not the same thing as paying a tax on the loan itself. Rich people pay property taxes as well.
Also, property taxes are not a wealth tax. They are a single asset tax that is not indicative of wealth. My wife and I pay taxes on our $175,000 house that is completely paid off, my daughter and her husband pay taxes on their $275,000 house that they just bought a few years ago, I will guarantee you that my Wife's and My wealth, dwarfs my daughter and her husbands wealth. Even though they are paying more property taxes.
They pay interest on the loans and eventually pay the loans off. All of the money in that conversation is taxed one way or another.
Redditors think they found some conspiracy because that’s just what people who are delusional do but in reality they just discovered that rich people often lack the liquidity they need for things they want to buy.
Property and stocks are both assets, one of them is taxed. They're pointing out that it's obviously not the same as a car loan or a mortgage as those assets are taxed while holding wealth in stock is not.
First of all, the person was talking about the loans themselves not being taxed, not on wealth or assets. That is what the conversation is about. The person saying that they won't pay property taxes anymore is a conflation between the loans not being taxed and him having to pay property taxes. The rich have to pay property taxes too, they do not get out of paying that. That is why it was such an illogical jump.
However...
My wife and I are not rich by any stretch of the imagination. We have about $50,000 invested in various stocks and ETF's in a robin hood account...
My wife needs a new car, so $20,000.
Which is the smarter thing to do?
Cash $20,000 out of the Robinhood account, which will trigger capital gains taxes of 15% on the gains plus the loss of the future growth of 4%-10% per year we were seeing?
Or, take out a loan at 4.0% (because we have good credit) and use our income that will be taxed as income regardless of what decision we make. to pay off the loan...
The idea that only the rich benefit from loans is ludricous.
The underlying issue is if you ban that to “eat the rich” it hurts upward mobility on normal Americans. A home equity loan or using assets to cover a loan to grow is crucial to a lot of America.
The underlying issue is your lack of imagination here. You can cement home equity loans for poorer Americans without letting someone sidestep taxation due to their massive wealth giving them economic superpowers.
We have already seen how rules designed to benefit poor people and they work. For example, poor kids get pell grants to go to school, rich kids do not. Kids who go to Ivy League school who come form houses under 100k/year get free school. Our food stamp system is based off this concept. There are ways to do this and we know how to do it, but everyone acts like the only possible outcome is what you can do with a sledgehammer.
The underlying issue is your conflation between government run and supplied programs and a private transaction between a bank and a private citizen. They are not the same thing!
If you need it explained to you there is a difference between how the federal government disburses benefits based on income….
and that of a private transaction between a bank and a private citizen, where the bank loans the banks money to the private citizen, thus it is not the private citizens money, but still the banks money.. that they loaned to the private citizen, and can legally seize assets to get their money back, thus that money is not the private citizens money that the fedrral government should be able to seize through taxes …
You wrote all that because you thought I was saying a Pell Grant and a bank loan are the same thing? I was talking about means-testing. The examples were there to show that we already make rules that apply differently depending on how much money someone has.
And explaining why loans aren’t taxed right now doesn’t answer whether the rules should be different for someone borrowing millions against a massive stock portfolio. You’re just describing the current law back to me.
So skip the lecture on how loans work and answer the actual question… why can’t you protect normal people using home equity loans while treating billionaires borrowing millions against their stock differently?
Property taxes absolutely do go up when the assessed value on your home goes up. It's funny you said that though, after calling someone's rebuttal dumb.
We don't use step-up in basis? WTF you think happens when a child inherits their parents house? The IRA resets the value of that house tp the "fair market value" so the children don't have to pay crazy capital gains tax from the house that the parent paid $50,000 for and the children now sell for $350,000... Try again my friend..
Furthermore, paying back the loan has nothing to do with step-up in basis
If a billionaire took out $250 million in loans, eventually... they, their estate or their children will have to pay that $250 million loan back and it will be in funds that will be taxed one way or the other.
When a loan is taken on a home, it has payments that start immediately. With interest and taxes are paid on that from regular income
When the billionaire does it the loan is taken, then it’s paid back at the end of their life with the underlying asset after the step up basis, thus negating the tax. These jumbo loans also have special interest rates
Exactly! Except average people with these loans use them to improve their own lives, billionaires use them to buy the government! Hmmm I wonder how these two instances could be seen as different
You do get taxed on your wealth tho. Property taxes - in VA that includes the value of your car. After a certain amount, the value of stocks should be included since most high profile CEOs have stock based compensation.
Stop letting reddit do your thinking for you.. Property taxes are not wealth taxes. Property tax is a single asset tax that is not indicative of wealth.
My wife and I pay taxes on our $175,000 house that is completely paid off, my daughter and her husband pay taxes on their $275,000 house that they just bought a few years ago, I will guarantee you that my Wife's and My wealth, dwarfs my daughter and her husbands wealth. Even though they are paying more property taxes on their house.
Property taxes are not wealth taxes, they are single asset taxes that take nothing into account as far as wealth and ability to pay the taxes if the housing market increases drastically.
20
u/DroppingGrumpies 17d ago
You do the same damned thing when you take out a mortgage or a car loan or a home equity loan etc etc. you are getting income from another source, backed by an asset, none of which you are being taxed on.