Comment by burlesona | Hacker News Reader

Comment by burlesona | Hacker News Reader

Parent Full thread

Most Billionaires are only Billionaires because of the value of the company they own a huge number of shares in, and they’re busy running that company which consumes all their time and energy. They also can’t cash out their shares (or at least not most of them) without risk of losing control of their company, so they don’t actually cash in on their vast wealth. Instead they’re happy to be a Billionaire on paper and “merely” live as a Millionaire.

Edit since I’m getting downvoted: yes the ultra rich can and do live off debt with their stock as collateral, but that gets you to the “merely” living a luxury lifestyle point. It’s not a viable mechanism for funding SpaceX, Blue Origin, Virgin Galactic, etc, which is the kind of “interesting stuff” this thread was talking about.

Not really. They just get loans at incredibly low interest rates, using their equity as collateral.

They can deduct dept/interest payments from taxes and never actually have to sell a lot of their stock. That way their wealth can accumulate and they don‘t really generate income. Almost like the tax code is skewed in their favor.

You too can take out a loan against some collateral and have the same tax treatment.

You can yeah. But you’re not gonna get anywhere near the rates/types of loans you can get as a billionaire.

The parent comment was complaining about unequal tax treatment, not about interest rates.

The interest rates aren't particularly important in this concept. Just that you have enough collateral so that you can life off the loan while the collateral appreciates in value, so that you're not forced to sell it.

How does the interest deduction work? I thought mortgage interest was the only interest people can write off their taxes.

I’m not really familiar with US tax laws tbh. But even if you can’t you would only ever need to liquidate equity to pay the interest. Only those payouts would count as income.

Maybe an accountant can chime in.

They have the ability to borrow vast amounts against the value of their equity.

This is not true. They can sell a fraction of shares, or get loans against collateral, and have $billion of cash is to spend.

Reply on news.ycombinator.com