Information Is BeautifulHow rich people avoid paying tax
(Originally by Instgram user @newmoney.blog)
jmjmI've known about this for a while but a piece of the puzzle is missing for me: what's the endgame?
What happens to the debt and collateral when the debtee dies? Is the debt called? Or does the whole arrangement transfer to the next generation?
LovesTha🥧@jmjm @infobeautiful Sell enough shares to pay the (low, because it is a safe secured loan) interest, pay a little tax on that. This puts your effective tax rate at (interest rate * capital gains tax), which is *very* low.
When you die your estate probably pays capital gains taxes, but you have probably set up some trusts to avoid that.
Stinkie McPhee@LovesTha @jmjm @infobeautiful best part about this situation (borrowing massive sums of money à la leveraging assets) is when Teddy Billionaire needs to pay off his debt, he can often convince the bank to minimize interest. I know of a specific NYC millionaire who argued down his loan to the point where he paid a fair percentage less than the loan was worth, by saying he was going to drop $10M into an investment fund.
And he didn't. So he got free money.
And he didn't. So he got free money.
Grassroots Joe@LovesTha @jmjm @infobeautiful
The basis for inherited stock is reset to the value on date of death. If the heirs immediately sell, the capital gain and taxes on that gain would both be zero.
Depending on the size of the estate and state of residence, inheritance taxes may kick in.
But, of course, if the estate is big enough to pay federal inheritance taxes, it's big enough to pay lawyers and accountants to draw up fancy trusts to avoid those taxes.
No wonder we need more IRS auditors...
Leszek Ciesielski
rateexportpilot@joeinwynnewood @LovesTha @jmjm @infobeautiful 💯💯💯. I can't tell you how angry it makes me when I consistently see the loudest progressive voices absolutely refuse to come to terms with the nature of these folks' wealth. I swear to God, most of them think Elon has a Scrooge McDuck vault they can raid and redistribute money from. They are absolutely convinced they have the solution to a problem they absolutely refuse to do the minimum homework in understanding.
@rateexportpilot @LovesTha @jmjm @infobeautiful
The greatest economic and political threat we face is from wealth consolidation ridiculously low taxes on unearned income and wealthy estates, I'm talking the top 1%, is fueling.
We really need to restore Clinton era marginal tax rates, like the day before yesterday. Eisenhower marginal rates would be even better to reverse the trend line.
Remember the deficit at the end of Clinton's administration? There was none! We were running a surplus!
Kenner@jmjm @infobeautiful that is why companies like Amazon have to grow no matter what, as long as its stock is on green the bank keeps landing money, if everything goes to shit, the insurance covers some of the debt, and the rest is covered by the government with taxpayer money.
Weltzeitgeist@jmjm @infobeautiful They get their income at the end of the year in the form of dividends. They pay their debt with that and they will even make a little profit which is taxed like in the middle. In the end its a combination of picture 2 & 3 + capital income flows from all sorts of things..
Truth Or Consequences ✅ 🇺🇦@wackJackle @jmjm @infobeautiful
The rich are incredibly stingy and cheap. I knew a fellow who paled around with a very wealthy fellow. The rich guy would get sugar at restaurants and fast food places that left out baskets of it.
GrantI think you missed the one where an off-shore shell company, bills his company for 'consulting' work. The company pays and the CEO has his money. Tax free.
They can also live in houses owned by shell companies and drive cars owned by shell companies and go on holidays paid by shell companies.
Schalk Neethling@infobeautiful I learned about this a few weeks ago, and it blew my mind. Apparently Bezos also makes use of the $4,000 education benefit you can claim from the government, seeing that he only earns $1 per month.
Bugspriet@schalkneethling @infobeautiful The Elon fanboys in my environment (I did not meet a single female) used "but he is such a selfless man, he does not even pay himself a wage" as an argument to prove, he is interested in mankind, not money.
@Bugspriet @infobeautiful Misinformed. Hopefully, we can clear this up so people can know that greed and ego stroking is all that feeds most of these "people".
@Bugspriet @schalkneethling @infobeautiful
Good PR is viewed as essential to rich folk.
SlightlyCyberpunk@schalkneethling @infobeautiful Some kinds of debt can be a tax deduction too...
Spas Kolev@infobeautiful that's why they invented the VAT
Tor Kingdon@spas_kolev @infobeautiful does a VAT tax unrealized capital gains? I think of them as being a regressive tax system like a sales tax.
@kingtor it's taxing consumption only so it is regressive in proportion of the saved income. But it's harder to evade
DB SchweinHarder to evade, but also significantly harder the poorer you are and the more individual purchases you make.
It's Vimes boot theory plus added tax 🫤
@spas_kolev yes, sales tax in the States is like that, too, and is my personal least favorite tax to pay because it is so regressive. And income tax would be much harder to evade if unrealized capital gains were taxed like interest income is
KackfreshVAT is a regressive tax, i.e. it affects the poor (proportionally) more than the rich.
It makes it all worse, really
Steve's Place@infobeautiful Exactly. It seems to me that what you'd want, in the No Tax option, is a loan at an APR of less than 25%. Repayment goes to the lender instead of the government. If you have enough collateral, as in the example, you should get a much better interest rate than the Less Tax option. The system is designed to help the wealthy avoid taxes. Option 3 benefits banks while bludgeoning governments.
Zee@infobeautiful not to be That Guy, but this is slightly inaccurate.
When stock is issued, taxes are paid on the value of the issued amount based upon “fair market value”
Source: incorporated a cooperative with all workers at company A as owners, Company A issued a substantial share of equity to the cooperative, the cooperative paid income tax on the equity issued, and workers paid income tax on their share of the profit
Domenico De Treias@zspencer
Yes, (in Italy) when I receive a share from my company as part of the revenue, I pay taxes for that.
They let you choose if you want to sell part of the equity as compensation, so you don't see your monthly salary reduced.
@infobeautiful
Yes, (in Italy) when I receive a share from my company as part of the revenue, I pay taxes for that.
They let you choose if you want to sell part of the equity as compensation, so you don't see your monthly salary reduced.
@infobeautiful
@De_Treias @infobeautiful yep, this is known as a “sell to cover”, if you are granted stock (or exercise an option to purchase stocks at a value substantially below market value) your issuer will often offer to “buy back” a chunk so you have cash to pay the tax man.
Not sure if the difference is your definition of "issued", or the ownership portion, but I do not pay tax when I buy stock. I only pay if I sell it, and the amount of tax I pay varies depending on how long I keep it.
That is correct. Issuing (or “granting”) stock is when someone is given stock without requiring them to purchase it.
When you purchase stock you do not pay taxes on the purchase, just on the difference in value between your initial purchase and your eventual sale.
Code of Amor 💘@infobeautiful @murdoc And this is only really targeting the low hanging relatable fruit of those who actually "work" for a living. The actual rich don't, and haven't for generations.
Sherri W (SyntaxSeed)@infobeautiful Ok but how is the loan paid back? Does the bank take the stocks that were used as collateral?
MDK@infobeautiful the thing makes no sense, it's even riskier for the lender than subprime mortgages-- stocks could tank overnight, just look at nvidia or tesla
Robin@infobeautiful
Is this American? Cos the middle one doesn't work where I am.
Is this American? Cos the middle one doesn't work where I am.
@eythian @infobeautiful yes, this is American. Not sure how the oligarchs do it in other countries
arceuthobium@eythian @infobeautiful they use stock options instead of shares.
Graeme 🏴@infobeautiful Nice diagram, covers the basic scam. Sure there are other layers, shell company ruses etc, but that's the nub of it that people need to understand.
mustRat didn't "buy" twatter with his own cash, he borrowed the money against stock value. Same old game.
mustRat didn't "buy" twatter with his own cash, he borrowed the money against stock value. Same old game.
Virginicus@pa27 @infobeautiful …until the stock our hypothetical billionaire used as collateral loses 20% of its value in a month. 😀 Pass the popcorn.
Zoidberg For President@infobeautiful Solution is simple: get rid of rich people.
Chuck@infobeautiful It's fun but it misrepresents debt right? I mean the stock is collateral so if they don't pay back the loan they lose the stock. And when they sell the stock to pay back the loan they still have to pay capital gains. Further, in the US the person in #1 and #2 would be subject to alternative-minimum-tax (AMT) which would tax them anyway, even if they didn't sell the stock. More realistic would be the use of company assets instead of salary to pay their own living expenses.
CrimeDad@[email protected] The CEO eventually has to sell the stocks to payback the lender, right, therefore incurring a tax liability? And the lender also pays income tax on the interest, right?
@[email protected] Does the CEO not owe income tax on the value of the stock when he receives it?
pelle ✅@infobeautiful is the image "a satirical illustration" or is the alt text AI generated??
Damon L. Wakes@pelle @infobeautiful It's definitely AI-generated. Nobody actually writing alt text would mistake this for a single diagram showing a CEO getting both salary and stock.
Kagan MacTane (he/him)@DamonWakes @pelle Thank you both, I also came here to call out the obviously AI-generated, and painfully inaccurate, alt text.
@infobeautiful, if you use AI for something, you really need to check its output. It often has gaps, is misleading, or is just plain wrong.
Frazell Thomas@infobeautiful This is why wealth taxes are needed and limitations placed on how much compensation can come via stocks.
Willow 
飛柳@infobeautiful @[email protected] It gets even worse, because when they die, the capital gains get "reset" and the basis of the value what it was when the patron died.
Gailen Olsonski@infobeautiful They have their tricks !
nantucketlit@infobeautiful This is why Steve Jobs was paid $1 per year when he returned to Apple in the late 1990s.
Flaming Cheeto@infobeautiful I think the highest long term cap gains tax rate is 20%
https://www.irs.gov/taxtopics/tc409
https://www.irs.gov/taxtopics/tc409
@infobeautiful don't forget he doesn't have to pay the bank back, his estate does after he's dead. That's why they call it "buy, borrow, die."
Kilian Evang@infobeautiful You may wanna edit that AI-generated alt text
Dawkins' Basilisk@infobeautiful WHY DOES NOBODY UNDERSTAND HOW PROGRESSIVE TAXATION WORKS? The guy in the first panel is not paying 40% on his entire salary JFC
It's a meme. It's generalising.
@deirdrebeth @infobeautiful it's contributing to capitalist propaganda
How?
How is omitting the fact that it's ~actually~ split between 10%, 12%, 22%, 24%, 32%, and 35% brackets, with everything over $609,531 being at the 37% rate, plus State and local taxes which sometimes follow a similar trend, but other States have none or flat taxes make that meme "Capitalist propaganda" and not just a simplification?
On 1 million salary your take home is $667,045 after federal taxes. The meme says 600k. That's a frickin' rounding error.
@deirdrebeth @infobeautiful 67 bags is a rounding error? Are you OK?
Neither of us is making 1m a year. I have at least dealt with those kinds of numbers.
Yes, *in this context* it absolutely is.
.067 to be specific.
LR@infobeautiful the borrowing is the weak point. when the stock crashes, richie rich and his bank are in trouble.
irina 🐇🌷
This image appears to be a satirical illustration
might wanna check that generated alt text before posting - and what's with the random 3d model of a guy in the bottom left corner?
ferret@infobeautiful somehow make this easy to accomplish for everyone with an income, then we'll see how quickly the rules change
netop://ウィビ@infobeautiful FINALLY, an explanation that I can understand. This is wild.