Comment by binlog | Hacker News Reader

Comment by binlog | Hacker News Reader

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Try this - go to a bank and say “I’d like to borrow money using my 401k/Roth IRA as collateral. If I fall behind in payments you can liquidate the entire thing, including penalties, and make yourself whole.”

You’d think they’d jump over each other to lend money against such a stable, secure asset right?

Except they’ll say “sorry, this isn’t allowed. IRS treats borrowing against an untaxed retirement account as an early withdrawal, even if the asset itself stays untouched.”

Turns out the government fully understands the concepts of stocks, gains, unrealized net worth and more, and has laws on the books to make sure you are being taxed appropriately for them.

Meanwhile billionaires have convinced you – through their machinery of media, influencers, politicians and more – that this exact same reasoning absolutely cannot be applied to their own wealth. Because it’s “paper money”. It doesn’t exist. There’s nothing to tax. Just cannot be done, or it’ll bend the laws of spacetime.

Your 401k/Roth IRA (subtracting early withdrawal penalty) amortized over the loan period literally do count when considering qualifying income for a conventional mortgage. This is not a taxable event. You do not actually have to make distributions. It's just standard procedure that it counts when determining whether you can pay the loan.

You misunderstood. The discussion was not about income qualifications for a loan but about collateral.

> Meanwhile billionaires have convinced you – through their machinery of media, influencers, politicians and more – that this exact same reasoning absolutely cannot be applied to their own wealth.

Quite the opposite: Socialist politicans and their media lapdogs have dishonestly convinced you that wealthy people are escaping taxes en-masse by taking out loans and that this can only be stopped by eye watering wealth taxes. They frequently use a motte and bailey confusing unrealized gains (which certainly exist in huge amounts but are also significantly fiction) with tax escape via loans collateralized by securities.

But it's not true: were there meaningful tax escape that way it could be addressed by establishing rules with conditions where taking a loan against securities can be treated as realizing gains (and adjusting cost basis accordingly). Doing so would be minimally disruptive and distorting and have relatively little legal complication (at least compared to wealth taxes!).

But the reality is that the claimed tax escape isn't happening (at least not at any significant scale) particularly in the current interest rate environment, so a reasonable policy change to address it would be a no-op.

... and to grow and maintain their political standing they specifically need to push a NON-SOLUTION because they can't campaign on something that was simply done and solved, and to retain your (highly monetizable) attention they need to rile you up against an Enemy, and certainly never address the state's addiction to wasteful spending and buying votes with tax dollars as one half of the revenue vs expenses equation.

wealth taxes solve the problem that the ultra-wealthy will find a way to make their income untaxable, and focusing on these loans is a red herring. its how theyre doing it now, but not how theyll do it an hour after you add this tax. That the ultra-wealthy propose this as the solution means theyve already planned the next work around.

they dislike wealth taxes, which are an old roman concept predating socialism, because the wealth tax covers all the work arounds they can think of.

it is a proper solution to the overall problem which is extreme wealth concentration.

the obvious alternative is nationalization of all assets worth more than 100M.

DOGE has pretty conclusively proved that the government has been incredibly efficient with spending and doesnt have an addiction to wasteful spending. instead the problem is wasteful monopolization and wealth concentration. society writ large has an addiction to giving a small cadre too much power and control, and they arent the government

Elon Musk paid $11bn in tax in 2021[0]. How much tax are you paying that you're looking at that and thinking the wealthy barely pay any tax?

[0] https://factually.co/fact-checks/business/did-elon-pay-11b-i...

I can't tell if you're accusing the state of waste and bribes no matter who is at the helm. You did specifically call out socialists, but the anti-socialists aren't improving that situation either.

> buying votes with tax dollars

This was more convincing of an attack on "Socialist politicians" before Sept. 9, when Trump did it more openly than they ever have. I guess you could believe his claims it won't come from tax dollars. But if the government has $1 trillion lying around for this and chooses not to unconditionally lower taxes for everybody, is it any different?

The head of the anti-socialist, anti-wasteful-spending party is spending billions on a more impressive Air Force One, golf days, family vacations, vanity renovations, DHS ads starring a POTUS wannabe, DOGE effectively paying people not to work, etc.

Everyone is guilty of it, just generally in their own form-- partisan nonsense is largely a distraction to get people mad at the other team and not notice their allies also picking your pocket. Though sure there are some particular ways different parties divide us and pilfer, bad in their own way.

Incredibly terrible example because you are allowed to borrow money against a 401k, up to $50000 with no penalties as long as you pay yourself back at whatever schedule you have determined for yourself

Is Larry page borrowing “up to $50000”?

No but he’s also not borrowing against his 401k? You and I can also go and borrow against stocks held in regular accounts? https://us.etrade.com/bank/line-of-credit

Does Larry Page’s brokerage account pay no taxes on dividends like a 401(k)?

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