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Comment by feelandcoffee | Hacker News Reader

This is the case of "Buy, Borrow, Die" or "kick the can". The top 0.01% paying a lower percentage of taxes than even the lower tax bracket worker class.

If you are a wharever-ionaire you could put your gains in index S&P 500 shares, then use them as collateral, paying everything you need with credit and having a $1 annual salary. So technically, that $1 it's their only income to the IRS. But what about interest? with that collateral, you have a special rate close to (or even lower than) inflation. Then you die, the bank takes your shares to pay your debt, and that's it.

https://www.wsj.com/articles/buy-borrow-die-how-rich-america...

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but that isn't very smart strategy because it prevents you from spending every dollar that you have ever earned.

At some point you want to open the floodgates so you don't leave any quality of life on the table.

You can't do that on margin loans, whereas you can if you are able to engineer a tax efficient way to cashout without paying capital gain tax

Nobody who uses this strategy will come even close to spending every dollar that they earned, they spend all they want yet still end up leaving all their wealth to their kids when they die.

> Nobody who uses this strategy will come even close to spending every dollar that they earned

But why? It's a lot of quality of life left on the table.

After the first hundred million dollars spent on personal expenditures, what material gains to quality of life are there?

However small, isn't it better than losing them? I think yes.

Because you can't bring that "quality of life potential" in the grave

It's not small, it's zero or even negative. If you already have everything you want, buying more is just extra crap you have to deal with.

Many people with money like this flip; preserving capital and reducing risk becomes the destination, not the journey.

It’s the way humans are wired, and there’s a whole industry of lawyers, accountants and others to support it.

Really depends, I can see a lot of quality of life on leaving family set for the next few centuries. And a lot of headache on managing the next personal island.

The FT runs a magazine called "How To Spend It" with ideas for what cheeky stylish thing to buy this month after you already spent it on what you want to. That this is apparently a lucrative business possibly tells you that you can max out your quality of life and still have money leftover.

https://www.ft.com/htsi

You missed a couple of steps.

> Then you die

> The bank takes your shares to pay your debt

> The IRS taxes this against your estate as income

> The entire value of your estate is taxed for any capital gains at the “fair market value” of all your assets at the time of your death

> and then that's it.

Doesn't this mean that it all still gets taxed, but if nothing goes wrong, then it's paid after you die?

Yes, every single piece of it is taxed. But a lot of people really don’t want you to think it is. Apparently a couple of articles about the calendar years in which some billionaire didn’t pay very much tax did the trick on the parent commenter.

You should read about the step up in basis loophole that happens when you die. That's the biggest one I'm aware of where your estate doesn't pay taxes after death that you would have owed in life. I'm sure there are many others I'm not aware of, but this is one everyone should know about.

> https://www.investopedia.com/terms/s/stepupinbasis.asp

And of course it's more nuanced than that, with stuff like accelerated depreciation, preferential tax rates on investment income, charitable lead annuity trusts, etc. ad infinitum.

That’s what the talk radio shills and similar right wing folks tell you.

The reality is that when you have enough cash to justify, you roll your assets into a series of South Dakota trusts and that money is perpetually tax-free.

Another tactic is to use Nevada and Delaware corporations to buy real property everywhere, and use that to avoid most taxation.

I see. Estate tax is a right wing radio conspiracy theory…

For most people, there’s little to no exposure.

The exotic trust structures talked about here are money laundering structures, which exist because gullible voters are duped with tales of widows losing houses and farm families losing the mythical family farm. There’s a reason why the home base for this is a state with weird banking laws where there’s more cattle than people.

Mitt Romney’s (I point him out because of his fame in this regard, he’s not unique or alone) great-great-grandchildren will be living off some untaxed trust 150 years from now when we’re all dead.

Corporations are people, my friend.

-- Mitt Romney

Not sure if worse than his descendants living tax free hundreds of years for now, is having his image whitewashed for his "bullwark against Trump" that weirdly only manifested in the latter part of his term.

No, they give their wealth to their family as gifts, and they have no capital gains because they were living like a royalty off of loans leveraged against their assets and so their effective gains are zero, among other tricks. It's easy for the rich to avoid taxes.

> living like a royalty off of loans leveraged against their assets

Maybe we should ban interest instead, just like how we were told thousands of years ago. See: Islam, Judaism, and Christianity.

This isn’t a criticism of your comment, but I have always thought it was funny that devout practitioners of those religions seem to find ways of technically adhering to those rules while at the same time completely flouting the spirit of them. See “Heter Iska and other evasions” here

https://en.wikipedia.org/wiki/Loans_and_interest_in_Judaism

…or “sabbath mode” on many appliances on the market.

The funny part to me is believing in an all-powerful and omnipotent god whom you can nonetheless fool with semantics and shuffling papers.

There was a discussion about this in the Netherlands. Ultimately it was concluded that Jesus was less important than the future of the nation. And these people were 100% orthodox protestants. Quantitative easing is just too good like that.

And now people cry about financial inequality. Sometimes the easy things out have long term consequences. We've living those consequences today across the globe.

> but I have always thought it was funny that devout practitioners of those religions seem to find ways of technically adhering to those rules while at the same time completely flouting the spirit of them.

We don't do that in Islam.

I would be interested in hearing more if you feel like elaborating.

For example, the Quran explicitly calls out the behavior of a tribe of Jews who, to tried to avoid the prohibition of fishing on the Sabbath: https://quran.com/7/163

We also have explicit texts in Hadith that call out and reprimand attempts to bypass usury by buying an item in installments, then selling it back to the original seller for a lower cash price. The effective transaction being a money for money contract with a disposable item in the middle. All this is prohibited.

You will not find a single Muslim scholar say that it is ok for a woman to wear a wig instead of a headscarf, even though technically she is still covering her hair.

> The funny part to me is believing in an all-powerful and omnipotent god whom you can nonetheless fool with semantics and shuffling papers.

There's no fooling going on. There's just faith traditions that believe God, either generally or for specific subsets of the overall rule set, is extremely concerned with the letter of the rules and not what humans might infer the spirit to be from the letter. That is, the rules are the rules, not an imperfect approximation serving some higher but difficult to express set of rules.

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