The very wealthy take out loans backed by their stocks so they don’t technically have income.
But wouldn’t they be taxed when they sell stocks to repay the loans?
In: Economics
You’re fundamentally misunderstanding something. It’s not tax evasion because there’s no “income” that they’re generating. Fundamentally it’s the same concept as you borrowing money for a car loan. You aren’t taxed on that. It’s just that the scale is in the tens or hundreds of millions using their stock as collateral. Since the banks are very comfortable with the collateral their interest rates are much lower than what you would get as a normal person.
Do they have to pay it back? Yes, eventually. ***Eventually*** being the key word here. The banks know this is basically a zero risk profit generating deal and will not rush for repayment. The billionaires defer the payments to the future where they think there will be a better tax situation or economic climate for them to maximize their stock sell off to pay off the loans. But in the meantime they can enjoy their earnings through a loan. This is basically a credit card loan with the repayment time of a mortgage. Basically if you were rich you could get loans like this, and would you really think it makes sense to tax loans?
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